Paycom Software: Investment Strategies and Put Options

Investment alert: Considering Paycom Software (PAYC)? Selling puts on the December 2026 $165 strike offers a 6% annualized return, higher than its 0.7% dividend yield. This strategy might mitigate risk for potential investors while reducing exposure to downside volatility.

Date: 21-03-2025

AI Rating: 7

Investment Strategy Insights
Investors eyeing Paycom Software Inc (PAYC) at $215.31 should evaluate alternative strategies such as selling put options. The December 2026 put at the $165 strike boasts a premium bid of $17.20, yielding a 10.4% return, approximately 6% annualized. This strategy presents a less risky approach compared to direct stock ownership, as the put seller only takes ownership if the stock price declines significantly.

Dividend Yield Comparison
The annualized return from selling the put option surpasses Paycom's current dividend yield of 0.7% by 5.3%. However, potential investors must recognize the risk associated with buying stock for dividends, particularly since the stock would need to drop about 23.2% to reach the $165 strike price for the option.

Dividend Predictability
Dividend amounts are generally unpredictable and depend on company profitability. Analyzing dividend history is crucial for gauging whether Paycom's current dividend is sustainable moving forward.

Volatility Considerations
The report indicates a trailing twelve-month volatility for Paycom at around 38%, which is essential for assessing the risk versus reward of the put option strategy. As put options volume increases, as evidenced by the current put:call ratio of 0.70, it's crucial to monitor market sentiment regarding Paycom.

Stocks: PAYC