Today a Covered Calls position was established in Bristol-Myers Squibb Co. (ticker symbol BMY) when the Covered Calls Advisor's buy/write limit order was executed -- 400 shares were purchased at $61.48 and four April 16th, 2021 Call options were sold at $2.19 at the $60.00 strike price. BMY has a March 31st, 2021 ex-dividend of $.49 (3.1% annual dividend yield based on today's purchase price) which is included in the return-on-investment (roi) calculations below.
Just prior to establishing this BMY Covered Calls limit order, a comparison of whether a Covered Calls or its comparable Cash-Secured Puts position would be preferable. As is normally the case when there is an intervening ex-dividend prior to options expiration, the Covered Calls position was preferable. As shown in the chart below, there are two financial advantages to Covered Calls in this case: (1) the potential Annualized ROI at expiration for Covered Calls exceeds that of 100% Cash-Secured Puts (+25.5% versus +23.1%); and (2) Covered Calls provide an additional possibility of early assignment (normally on the day prior to the ex-dividend date) with a potential Annualized ROI of +36.4% which is better than the +25.5% AROI if assigned at expiration. With Cash-Secured Puts dividends are never captured. Note: Click on image below for a larger view. 
Bristol-Myers is rated as a Moderate Buy by analysts. Reuters Research
indicates that currently 14 analysts have a Buy or Outperform rating, 5
have a Hold, and none have an Underperform or Strong Sell; and their
average target price is $74.59 (21.3% above today's purchase price).
Importantly, most of their fundamental valuation metrics (including
various cash flow metrics) are currently better than their prior 5-year
average. Earnings per share in FY2020 were $6.44 per share and are estimated to grow by another 16% this year which implies a forward P/E ratio of only 8.2 based on Bristol's current price of $61.48. On the down
side, Bristol-Myers added substantial long-term debt to its Balance
Sheet when it acquired Celgene late last year and MyoKardia last Novermber.
Morningstar's commentary in support of their wide moat rating is
compelling and describes how they are positioned to improve their roic
in the near-term future: "Based on a wide lineup of patent-protected
drugs, an entrenched salesforce, and economies of scale, Bristol holds a
wide economic moat. The patent protection allows the firm to price its
drugs at levels that translate into superior returns on invested
capital compared with its cost (particularly in cancer drugs, an area of
focus for Bristol). The patents also provide Bristol with ample time
to bring forward the next generation of new drugs. Additionally,
several of their currently marketed drugs are biologics, which create
additional hurdles for generic small molecules. Further, because many
small drug companies lack a distribution channel, Bristol's entrenched
salesforce enables the company to partner with these smaller drug
companies to gain access to externally created drugs, augmenting its
internal drug-development efforts. Additionally, their sheer size
generates the strong and stable cash flows required to fund the
approximately $800 million needed, on average, to bring each new drug to
the market."
Although the Covered Calls Advisor depends primarily on fundamental
valuation and competitive position factors in deciding what stocks to
purchase, a minor consideration is given to technical factors. In that
regard, BMY stock was down 1.4% today from yesterday's closing price and
the 2-day relative strength index [i.e. RSI(2)] for Bristol-Myers moved
into short-term oversold territory at 23 (below 30 is normally considered oversold) this morning when this buy/write
limit order was executed.
