InvestorsObserver Weekly Article

In partnership with InvestorsObserver, we are pleased to provide a new Featured Article every week. Get InvestorsObserver's free report "18 Warning Signs to Know When to Dump a Stock" and read all four articles plus more expert analysis each week.

The InvestorsObserver articles are provided by Fresh Brewed Media/O2 Media, LLC (“FBM Content”). The FBM Content, including any strategies discussed therein, is provided for general informational and educational purposes only and is not to be construed as investment advice or as an endorsement, recommendation or solicitation to buy or sell securities. In order to simplify the computations, commissions, fees and taxes have not been included in the strategy examples used in the FBM Content. These costs will impact the outcome of all stock and options transactions and must be considered prior to entering into any transactions. Investors should consult their tax advisor about any potential tax consequences. Use of the FBM Content is subject to the Terms and Conditions of the Cboe Website.

Article Archives

 

Michael Fowlkes' Analyst Insights

InvestorsObserver
Options and ETF Analyst Writer
Michael Fowlkes
Author Bio

 

Ecolab to announce dividend increase

Michael Fowlkes

12/2/2017 12:54 PM

What's Happening

Ecolab (ECL) has a lengthy 31-year streak of dividend increases, which it is likely to extend this week when it announces its next distribution. The stock recently hit a new all-time high, and shares are up 15.1% on the year.

Technical Analysis

ECL was recently trading at $135.85, down $0.93 from its 12-month high and $19.44 above its 12-month low. Overall technical indicators for ECL are bullish and the stock is in a strong upward trend. The stock has recent support above $129.50, and recent resistance below $136.75. Of the 18 analysts who cover the stock, nine rate it a “strong buy”, one rates it a “buy”, and eight rate it a “hold”. ECL gets a score of 73 from InvestorsObserver’s Stock Score Report.

Analyst's Thoughts

Ecolab has a very strong history of dividend increases that spans three decades. The stock has a relatively low yield of 1.09%, but that should rise a bit when the company announces its next distribution. With a low 31.5% payout ratio, Ecolab can easily afford another dividend increase this year, but investors should not expect a huge increase. The last two years the company boosted its payout by two pennies, and I would expect a similar increase this year. Look for the quarterly distribution to rise from $0.37 to $0.39, for a 5.4% increase. Expect the announcement this week, with the stock trading ex-dividend about a week following the announcement.

Stock Only Trade

If you're looking to establish a long stock position in ECL, consider buying the stock under $135.50. Sell if it falls below $122.00 or take profits if it gets to $156.00.

Bullish Trade

If you want a bullish hedged trade on the stock, consider an April 120/125 bull-put credit spread for a 60-cent credit. That's a potential 13.6% return (35.6% annualized*) and the stock would have to fall 7.6% to cause a problem.

Bearish Trade

If you want to take a bearish stance on the stock at this time, consider an April 150/155 bear-call credit spread for a $0.25 credit. That's a potential 5.3% return (13.7% annualized*) and the stock would have to rise 10.6% to cause a problem.

Covered Call Trade

If you like the stock, but wish to lower your cost basis on a new position, you may want to consider an April $140.00 covered call. Buy ECL shares (typically 100 shares, scale as appropriate), while selling the April $140.00 call for a debit of $133.50 per share. The trade has a target assigned return of 4.8%, and a target annualized return of 12.7% (for comparison purposes only). 

 

 

Articles and other Content