NEW YORK (TheStreet) - New York-based Colgate-Palmolive (CL) made a new 52-week high last week, and if you're not long you may want to take another look. I'm going to show you how to capture all the upside without exposing your portfolio to all the risk.
Colgate-Palmolive, together with its subsidiaries, manufactures and markets consumer products worldwide. You may know the company for its toothpaste products, but it markets a wide range of products including pet supplies. It's stock, currently trading around $65, is down nearly 1% for the year to date.
Colgate-Palmolive hit my radar because of several factors. Strong revenue growth, dividends increase 300% during the last 10 years, bottom-ling earnings per share that support a rising stock price, and the company is about to distribute a fat dividend.
The company pays an oversized yield of 2.25% and the next ex-dividend date is April 17. Others may buy shares, but I'll show you another strategy to profit if the stock moves higher between now and the ex-dividend date. By using options and specifically in-the-money call options, investors can rent Colgate-Palmolive for almost free until April 16.
Call options give the buyer the right but not the obligation to buy a stock within a set period of time at a set price. Many factors influence the price of options including the underlying price, implied volatility, time until expiration, and interest rates, and dividend payments. I posted a Real Money Pro trade idea for Colgate-Palmolive for your review if you want exact entry and exit points.