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Whether at work or home the heating and cooling units always seem to be in need of repair. This provides steady cash flow for the king of HVAC Ingersoll Rand (IR). The company does $24 billion per year in business.
Ingersoll Rand is the brand for industrial systems but the company has commercial and residential brands such as Trane and American Standard. Additionally, it produces Thermo King refrigerated truck systems.
Ingersoll Rand operates a big profitable global business. Having generated $15 billion in sales over the past 12 months with an 8.4% profit margin. That meant $1.2 billion in profits for the company and earnings per share (EPS) of $5.02.
With billions of free cash flow the company is able to treat shareholders well. Since 2011 22% of the companies shares have been repurchased leaving the remaining shares more valuable. The company also consistently increasing the dividend payment each year with a current yield of 2.1%.
The shares trade a a good price having an EV/EBITDA ratio of 13.
Shares have been in a steady uptrend.
The time to earn a cash payout is now.
Sell the September 21, $100 puts on Ingersoll Rand for $2.30 using a limit order. Receive a 2.3% upfront payment for agreeing to purchase shares at a 0.2% premium.
At expiration if shares are above $100: put sellers will keep the $2.30 free and clear. A 26% annualized return.
At expiration if shares are below $100: put sellers will still keep the $2.30 effectively buying shares at a 2.1% discount to today's price.
For protection us a stop loss at $88. The shares will have closed below a recent low putting the uptrend at risk. It is best to exit than to pray for the stock to rise.
Great chance to benefit from all those HVAC systems that need repairs and maintenance.
Disclosure: I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.