E Facebook: Income Strategy For A Non-Dividend Paying Stock

Facebook (FB) is still in a high growth phase and therefore does not yet pay dividends to shareholders. The good news for investors is that the stock is appreciating at a market-outperforming pace. Some investors might be happy to let the stock ride over the long-term, while others may want to generate income from the investment.

The chart shows that Facebook’s stock was recently selling at an overbought level. This is evident by the stochastic oscillator which rose above the overbought level of 80 and is now breaking below that level. Now is a good time to consider extracting some income from your investment. 

For those who want to generate income from the investment there are two strategies: 

  1. Sell a few shares after a run-up in price
  2. Sell covered calls

Selling Some Shares

Investing in individual stocks isn’t always all or nothing. You don’t have to own the stock or not own the stock. Selling some shares after a run-up in price, while maintaining a core position, is a viable strategy to generate income at certain times. For those that bought into Facebook at a much lower price, consider selling a few shares to lock in some profits to create your own dividend payments. 

If you want a 3% dividend payment, then sell 3% of your shares. If you want a nice fat 10% dividend, then sell 10% of your shares. You can then let the remaining position ride higher and sell more shares at the next overbought level. This will allow you to lock-in some profits, while you benefit from Facebook’s above average growth. 

If the stock dips to an oversold level (below 20 on the stochastic oscillator), you can consider purchasing more shares. If Facebook’s fundamentals look strong going forward as they do right now, then accumulating more shares after a dip in price will help build back your position in the investment at a lower valuation.

Selling Covered Calls

After the recent run-up in price, Facebook’s call options have higher premium levels. Since the stock is near an overbought level, it is more likely to pullback in the near term as investors take profits. This makes the likelihood of the near term out of the money calls to expire worthless, which is what you want when selling them. 

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Disclaimer:This article represents the author's opinions.  Investors should do their own due diligence and consult with an investment advisor to determine which stocks are right for ...

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Kurt Benson 5 years ago Member's comment

@[David Zanoni](user:25795), great piece. I too think #Facebook is killing it right now and has many years of growth ahead of it. But for those not wanting to hold the stock for the long term, these are great alternatives to make money now. $FB

David Zanoni 5 years ago Author's comment


These strategies still work for those who want to hold onto the stock for the long-term!