Get Outstanding Total Return on a Low-Risk Blue-Chip Stock

Sometimes you feel like a nut. Sometimes, you don't. It's the same thing with investing. You might seek out exciting upside most of the time, but every now and then it's nice to have some low-risk, reasonably attractive alternatives sans home-run potential. Financial powerhouse Northern Trust falls into the latter category. There's been no bad news on the company over the most recent decade as illustrated below. Since the end of 2012 EPS grew by 165% and dividends advanced by 141.5%. Shares outstanding were reduced by 13.4% over that period. Continuous shareholders did well, with almost 119% in total return. That figure was better Jan. 13, when NTRS carved out an all-time high north of $135. As of Thursday, NTRS had declined almost 30%, to south of $96 despite being on track for its best year ever. That pullback is what makes the shares so tempting right now. What should Northern Trust be selling for? Its average price-to-earnings since 2012 has run 16.9-times, accompanied by around 2.32% in current yield. As of Thursday, its multiple was just 12.8-times this year's estimate and only 11.5-times its projected EPS for 2023. NTRS's yield, at 3.15%, is now 35.8% higher than its historically normal level. There were just two times since 2012 that NTRS sold for the same or cheaper price-to-earnings than it now commands on next year's earnings. Its Christmas Eve 2018 capitulation low of $76 was fleeting. The stock immediately began climbing and hit $110.50 before the end of 2019. The other instance when NTRS was available at a more favorable valuation was at its momentary Covid-panic low. Lucky buyers at under $61 were rewarded with a 22-month run to $135. Returning to its typical P/E could send NTRS up to about $140 by the end of 2023. Even a slightly discounted multiple suggests a move to $133 or so, plus any dividends collected along the way. Yahoo Finance calls for $114.38 for NTRS by this time next summer. That seems low to me but would still provide a 23.1% return in the coming year. Independent research firm Morningstar is more bullish on NTRS than that. It lists NTRS as a 4-star, out of 5, Buy. Morningstar deigns to provide year-ahead goal prices but does let us know they see NTRS as worth $108 right now. Note that NTRS peaked at nearly $127 during 2021 and $135 eight months ago. Fundamentals, and the stock's true value, are better now than ever before. Option-minded traders can snare juicy premiums via sales of April 21, 2023 expiration date puts at strikes from $90 to $100. Actual pricing on those, with NTRS at $95.62, are shown below. Worst-case, forced purchase prices dropped to either $83.50, $86.50 or $88.40 depending of the strike prices employed. If you agree with my analysis standing ready to own high-quality Northern trust at any of those if exercised levels should appear far from scary. The chart below details NTRS' price action since Jan. 1, 2021. Owning NTRS at the break-even prices on the $90 and $95 puts would have been winning positions 100% of the time dating back more than 20-months. Even the $88.40 worst-case purchase price on the Apr. 2023 $100 puts would have been in profit for all but about two-weeks since the beginning of 2021. Owning NTRS is unlikely to change your life. It's quite likely, though, to provide very good total returns with only the slightest chance of performing badly over the long-term. Buy some Northern Trust shares, sell some NTRS puts or consider doing both.

Get Outstanding Total Return on a Low-Risk Blue-Chip Stock

Here's one you can 'Trust.'

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