Ashland Announces Dividend Hike and Stock Buyback

Posted Mar 17th 2011 1:30PM by Brent Archer
Filed under: Good news, Options, Technical Analysis

Ashland (ASH - option chain) shares are rising today after the company announced plans to lift its annual dividend to 70 cents per share from 60 cents per share. The company also said its board authorized $400 million in stock buybacks. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on ASH.

ASH opened this morning at $57.61. So far today the stock has hit a low of $57.25 and a high of $59.07. As of 12:20, ASH is trading at $57.52 up $1.52 (2.7%). The chart for ASH looks bullish and S&P gives ASH a positive 4 STARS (out of 5) buy ranking.

For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $45 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in four months as long as ASH is above $45 at July expiration. Ashland would have to fall by more than 21% before we would start to lose money. Learn more about this type of trade here.

ASH has not been below $45 since September and has shown support around $55 recently.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ASH.

Tags: ASH, Ashland, dividend, inthenews, Investors Observer, options, stock buyback