Investors Consider STERIS plc Put Options Strategy

Investors are weighing options for STERIS plc to secure a 7.4% annualized return by selling puts. The report highlights cautious market sentiment around the $218.09 share price yet presents alternatives that could mitigate risk while maintaining income potential through options trading.

Date: 21-03-2025

AI Rating: 6

Earnings and Profitability Considerations: The report discusses STERIS plc's dividend yield of 1.1% annualized, which sends a signal on its profitability. Analyzing the company's profitability is crucial since dividends often depend on consistent earnings, which are implied in the discussion about dividend amounts and their predictability.

Volatility and Risk: The analysis mentions a trailing twelve-month volatility of 21%, indicating the stock has exhibited considerable price fluctuation. This level of volatility could suggest that there is increased risk associated with stock ownership, reinforcing the strategy of selling puts as a potentially lower-risk alternative.

Put Selling as an Investment Strategy: The highlighted strategy of selling the September put at the $200 strike price provides insight into how traders can generate a premium of $7.40. With a 3.7% return against a $200 commitment, this becomes an attractive alternative for income-focused investors. The mention of downside risk if the stock price falls is an important consideration for potential investors.

Overall, while the original share price presents a high entry point, the outlined put options strategy could serve to mitigate losses if the stock declines. Moreover, selling puts can provide an alternative cash flow, which can be essential in uncertain market conditions.

Stocks: STE