ConocoPhillips Has a 3.42% Annual Yield, however Quick-Put Buyers Can Make 1.5% Month-to-month

ConocoPhillips (COP) inventory has a 3.42% dividend yield, properly beneath its 5-year common. Because of this, its worth goal is at the least 29% greater at $126.65 based mostly on this yield. However, buyers can promote brief out-of-the-money (OTM) put choices and earn about 1.5% month-to-month.

COP closed at $98.19 on Friday, Jan. 16. It has closed as little as $90.16 within the final month (December 16) and customarily traded in a spread between $90 and $100 for the previous 2 months.

Nonetheless, since Nov. 6, 2025, when ConocoPhillips raised its quarterly dividend by 7.69% to 84 cents from 78 cents (i.e., $3.36 annual dividend per share or DPS), COP inventory has been slowly shifting greater.

That is probably as a result of its annual dividend yield continues to be a lot greater than its historic common. That suggests that COP inventory has a better worth goal.

I mentioned this level and the concept of shorting OTM places in my Dec. 19, 2025, Barchart article (“ConocoPhillips Inventory Nonetheless Seems to be 18% Undervalued – The right way to Play COP Inventory?“) and a previous Nov. 21, 2025, Barchart article.

For instance, Yahoo! Finance studies that COP has had a median dividend yield of 2.53% over the past 5 years. That’s properly beneath at present’s yield of 3.42% (i.e., $3.36 DPS/$98.19).

As well as, Morningstar says COP has had a 5-year historic common of 2.29%. Nonetheless, Searching for Alpha says the common has been 3.14%.

So, on common, these surveys present that the 5-year common yield has been 2.653%.

Due to this fact, if we assume that over time, COP inventory will rise and decrease its 3.42% yield in order that it reaches 2.653%, right here is the value goal (PT):

 $3.36 DPS / 0.02653 = $126.65 PT

That’s 29% greater than at present’s worth:

$126.53 PT / $98.19 at present = 1.291 -1 = +29.1% upside

In different phrases, there’s nonetheless good upside in COP inventory, even when oil and gasoline costs keep flat or fall. This assumes that the market feels that its common yield must be 2.653%.

However, simply to be conservative, let’s assume the yield approaches 3.0%:

$3.36 DPS / 0.03 = $112.00 PT

That’s nonetheless 14% greater than at present’s worth. The underside line is that the COP inventory could possibly be undervalued.

One option to play this, to realize further earnings and set a decrease potential buy-in level, is to promote brief out-of-the-money (OTM) cash-secured put choices in month-to-month expiry intervals.

In my final Barchart article on Dec. 19, I advised getting into an order to “Promote to Open” 1 put contract expiring Jan. 23, 2026, on the $88.00 strike worth. That train worth was 5% decrease than the buying and selling worth on the time ($92.44).

On the time, the premium acquired was $1.13 per put contract, offering an instantaneous yield of 1.284% (i.e., $1.13/$88.00). As of Jan. 16, this put premium has fallen to $0.12 on the midpoint and is prone to expire nugatory. So, this has been a profitable commerce.

Buyers could make related earnings going ahead. For instance, the Feb. 20, 2026, expiry interval exhibits that the $92.50 train worth put contract has a midpoint premium of $1.63. This strike is 5.79% decrease than Friday’s shut.

Due to this fact, an investor shorting the $92.50 put contract expiring on February 20 earns an instantaneous yield of 1.762% (i.e., $1.63/$92.50).

However, simply to be conservative, take a look at the $90.00 strike worth expiring Feb. 20. It has a midpoint premium of $1.05. That gives a short-seller of this put makes a 1-month yield of 1.167% (i.e., $1.05/$90.00).

The purpose is {that a} conservative investor (who shorts each contracts) can earn a comparatively secure common yield of just about 1.50% over the subsequent month:

1.167% ($90 short-put play) + 1.762% = 1.4645%

Provided that each contracts have comparatively low delta ratios (i.e., between -0.18 and -0.26), there’s solely a few 22% probability that COP will fall to between $90 and $92.50.

Nonetheless, the chance is that COP falls beneath $90.00 on or earlier than Feb. 20. That would doubtlessly lead to an unrealized capital loss. However at the least the investor has acquired earnings that lowers the breakeven level.

The underside line is that COP nonetheless appears to be like undervalued. One option to play that is to promote brief out-of-the-money (OTM) places in 1 month expiry intervals.

On the date of publication, Mark R. Hake, CFA didn’t have (both instantly or not directly) positions in any of the securities talked about on this article. All info and knowledge on this article is solely for informational functions. This text was initially printed on Barchart.com