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Andrew Tobias
Andrew Tobias

Money and Other Subjects

20 Calories Per Serving

October 15, 2007March 10, 2017

ACROSS THE UNIVERSE

If you are a child of the Sixties – or a teenage girl, apparently – don’t miss this wonderful movie.

DENTYNE ICE-THE PERFECT FOOD

I know: more fruit and vegetables. I do that too. But consider the advantages of chewing a couple of those little white Dentyne Ice chiclet-like things every time you finish eating something. It’s akin to brushing after every meal, and thus good for your teeth . . . good for your breath . . . which is good for your social life and workplace relations . . . it’s a 20-calorie dessert substitute (assuming you go crazy and chew four pieces, seriatum) . . . which is good for your weight and thus for your health, social life again, and self-esteem . . . it may even make you smarter. And at drugstore.com, it’s less than a buck a pack.

WA-MOOOPS!

Friday’s suggestion about Washington Mutual January 2010 LEAPS may or may not turn out to be a good one, but there’s something one of you pointed out that I hadn’t considered: The underlying stock is currently paying a 6.3% dividend and has a multiyear history of raising the payout by a penny every quarter. Which is very nice, except that, of course, with the LEAPS you forgo the dividend – and, perhaps more to the point, you will effectively have to pay it out of your LEAP price every quarter when the stock goes ex-dividend. Not literally pay it; but what happens when the 56-cent dividend is declared is that, by definition, the stock is worth 56 cents a share less than it was a minute ago . . . because each share represents ownership in 56 cents less cash.

This is doubtless one of the reasons the LEAPS carry only a modest premium over their intrinsic value. (I may not have thought of this; but the market has.)

I’ll probably hang on to the LEAPS I bought. If, despite the likely continued housing and credit problems, WM’s dividend continued to increase a penny a quarter . . . bringing it to $2.33 or so by January 2010 . . . and if by then the market had decided it could live with a 5% dividend from WM . . . then the stock would be $46.60. (A $2.33 dividend divided by 5% = $46.60.) In this happy scenario, the option to buy it at $30, which today costs about $8, would be worth $16.60, or about double.

Of course, if any manner of challenges and difficulties should cause the stock to remain unchanged, at $35 or so, you would have lost a big chunk of your money (and if the stock were $30 or below you would have lost it all) . . . whereas someone who had chosen simply to hold the stock, rather than swing for the fences with the LEAPS, would have been contentedly collecting more than 6% a year in dividends.

If you buy the LEAPS, you must be prepared to lose your money. It’s a definite possibility.

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