Taking A Fling On FLNG As Europe Stocks Up On Natural Gas

Liquefied natural gas shipping companies continue to enjoy a brisk business transporting LNG LNG to Europe, which is building inventories of natural gas for the winter in the face of shutdowns of gas pipelines from Russia RUSSIA . Norwegian-managed and Bermuda-based Flex LNG Ltd. (FLNG) owns a fleet of thirteen state-of-the-art LNG carriers, and as the CEO CEO illustrated in a presentation this week, all of its vessels are booked solid through mid-2024.

This buy write trade does not earn a dividend from FLNG, but it does offer the potential to earn 6.65% over the next 36 days. Please email me (jdobosz@forbes.com) at any time with questions about how to use Forbes Premium Income Report. — J.D.

Flex LNG Ltd. (FLNG) - Buy Write

Buy 100 FLNG

Sell to Open 1 October 21 $34.50 Call

Execute for Net Debit of $32.35 or lower

Revenue this year for FLNG is expected to grow less than 1% and earnings are forecast to dip 2.7% to $2.92 per share. At 11.4 the next 12 12 months of expected earnings, FLNG trades 24% below its five-year average P/E ratio of 15.

Yielding 8.5%, FLNG is a prodigious dividend payer, including special dividends like the one for $0.50 per share earlier this month. We do not tap into that dividend on this trade, but we could earn more than 67% annualized from one of the stocks on the Top 100 at Barchart.com.

Here is the buy write: Buy 100 FLNG, and sell to open one contract of $34.50 October 21 calls for a net debit (stock price minus options premium) of $32.35 or lower.

If FLNG closes above $34.50 in 36 days, we would earn $2.15 per share on $32.35 at risk, or 6.65%. On an annualized basis, that would be 67.4%. If FLNG closes at or below $34.50 at expiration, we will still own the stock at a cost basis of $32.35 per share.

Options income for this trade: We earn $238 selling 1 FLNG October 21 $34.50 call contract. Click here for updated bid-ask and return characteristics.

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John Dobosz is editor of Forbes Dividend Investor, which provides a weekly portfolio of high-yielding, value-priced income stocks, REITs and MLPs, and Forbes Premium Income Report, which sends out options-selling trade recommendations on two dividend-paying stocks every Tuesday and Thursday.

NOTE: Forbes Premium Income Report is intended to provide information to interested parties. As we have no knowledge of individual circumstances, goals and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any assets or securities mentioned or recommended. We do not guarantee that investments mentioned in this newsletter will produce profits or that they will equal past performance. Although all content is derived from data believed to be reliable, accuracy cannot be guaranteed. John Dobosz and members of the staff of Forbes Premium Income Report may hold positions in some or all the assets/securities listed. Copyright 2022 by Forbes Media LLC.