• Walmart is an excellent candidate for an income strategy. It’s undervalued, a dividend aristocrat and performs exceptionally well in recessions.
  • The strategy involves the sale of a covered call right before earnings are announced.
  • This enables the investor to take advantage of inflated implied volatility which makes call prices more expensive than normal levels.
  • How To Generate A 10 Percent Yield From Walmart Stock


    Why Walmart (NYSE:WMT)? We live in a world where yield is king. Central banks around the world have kept interest rates artificially low which have crippled retirees and savers alike. Japan has become the latest victim in the world-wide interest rate debacle announcing the move to negative interest rates last week. Switzerland also has prevailing negative rates and I believe before long, this may be the Fed’s course of action also. Why? Well, volatility has spiked meaningfully this year and the Fed won’t be able to keep its tightening cycle going if the likes of China and Japan are contracting. This is why we have to take the U.S. jobs number announcement on Friday with a pinch of salt. It will probably come in big again but jobs alone won’t dictate the Fed’s policy. In fact, most of the jobs being created in the U.S. are low paying service jobs and not high paying manufacturing jobs.

    Moreover, results this week showed that the service sector’s growth is slowing down and equity markets suffered as a result. Therefore, with Europe, Japan and China itching to increasing their easing measures in the near term, the U.S. may be the next country forced to act. So where can investors find yield in a world where bond yield are at all time lows and U.S. equities look overbought after a 7-year bull run? Well firstly, protecting the downside is key, which is why Walmart is a good candidate at the moment. McDonalds (NYSE:MCD) also thrives in recessions, but its valuation is a bit rich for me at the moment. Let’s go through Walmart and discuss how it could be a high yielding hands-off investment for you in 2016.

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