This position uses the Covered Calls Advisor's Dividend Capture Strategy (see here) since Genuine Parts has an upcoming quarterly ex-dividend of $1.00 per share (a 2.8% annual dividend yield) on February 29th which is prior to the March 15th options expiration date. This is equivalent to an annualized dividend yield of 11.1% = [($1.00/$143.41) x (365/23 days to expiration)]. This dividend is included in the detailed return-on-investment calculations below. Either an early assignment on the last trading day prior to the ex-dividend date or on the March 15th options expiration date would be desirable to the Covered Calls Advisor given the potential annualized return on investments for either outcome. Importantly to the Covered Calls Advisor, there is no quarterly earnings report prior to the options expiration date since the next earnings report on April 18th, 2024 is after the March 15th options expiration date.
The Genuine Parts Company is based in Atlanta and is a distributor of automotive replacement parts under the NAPA brand (about 60% of sales) and also an industrial parts distributor (about 40% of sales). It has about 6,600 stores in North America and also has a growing presence internationally with an additional 3,000 locations in Europe and Asia that services maintenance, repair, and original equipment manufacturers. Some potential catalysts for the company include: (1) consistent quarterly EPS beat and at a rate faster than the typical mid-single digits revenue growth; (2) plans to continue increasing operating margins; (3) continued global expansion; and (4) confidence of management as demonstrated by the recent 5.3% quarterly dividend increase. Their stock valuation is also attractive with a 2023 actual P/E ratio of 15.3 compared to their prior 5-year average forward P/E of 18.8. 
As detailed below, two potential return-on-investment results are:
Genuine Parts Company (GPC) -- New Covered Calls Position
The buy/write transaction was:
2/21/2024 Bought 200 Genuine Parts Company shares @ $143.41.
2/21/2024 Sold 2 GPC 3/15/2024 $140.00 Call options @ $4.65 per share.
2/29/2024 Upcoming quarterly ex-dividend of $1.00 per share.
Two possible overall performance results (including commissions) for this Genuine Parts Company Covered Calls position are as follows:
Covered Calls Net Investment: $27,753.34
= ($143.41 - $4.65) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$928.66
= ($4.65 * 200 shares) - $1.34 commission
(b) Dividend Income (If Genuine Parts Call options exercised early on February 28th, 2024, the last business day prior to the Feb. 29th ex-div date): +$0.00; or
(b) Dividend Income (If GPC stock assigned at the March 15th, 2024 options expiration date): +$200.00
= ($1.00 dividend per share x 200 shares)
(c) Capital Appreciation (If shares assigned at $140.00 strike price at the March 15th options expiration): -$682.00
+($140.00 - $143.41) * 200 shares
At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy. As shown below, all nine criteria are achieved for this Genuine Parts Company Covered Calls position.
As shown on the table at the bottom of this post, all nine criteria of the Dividend Capture Strategy are met with this position. Even if the Genuine Parts stock price declines somewhat during the next 23 days until the options expiration date, if the stock closes above the $140.00 strike price, then a satisfactory annualized-return-on-investment of +25.5% will be achieved. The Delta for these Call options was approximately 68.5 when this position was established which approximates the probability of 68.5% that the position will be in-the-money at market close on the options expiration date.
There are 10 Wall Street analysts covering the Genuine Parts Company and their average Target Price is $158.90 which is +10.8% above today's purchase price. Another reason for establishing this position was that Genuine Parts was highly ranked in my Quality +Value +Growth stock screener since all 18 filters in that screener are currently achieved (see chart below):
As detailed below, two potential return-on-investment results are:
- +0.9% absolute return-on-investment (equivalent to +40.5% annualized
return-on-investment for the next 8 days) if the stock is assigned early (on the last business day
prior to the February 29th ex-dividend date); or
- +1.6% absolute return-on-investment (equivalent to +25.5% annualized return-on-investment over the next 23 days) if the stock is assigned on the March 15th, 2024 options expiration date.
The buy/write transaction was:
2/21/2024 Bought 200 Genuine Parts Company shares @ $143.41.
2/21/2024 Sold 2 GPC 3/15/2024 $140.00 Call options @ $4.65 per share.
2/29/2024 Upcoming quarterly ex-dividend of $1.00 per share.
Two possible overall performance results (including commissions) for this Genuine Parts Company Covered Calls position are as follows:
Covered Calls Net Investment: $27,753.34
= ($143.41 - $4.65) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$928.66
= ($4.65 * 200 shares) - $1.34 commission
(b) Dividend Income (If Genuine Parts Call options exercised early on February 28th, 2024, the last business day prior to the Feb. 29th ex-div date): +$0.00; or
(b) Dividend Income (If GPC stock assigned at the March 15th, 2024 options expiration date): +$200.00
= ($1.00 dividend per share x 200 shares)
(c) Capital Appreciation (If GPC's Call options assigned early on Feb. 28th): -$682.00
+($140.00 - $143.41) * 200 shares; or(c) Capital Appreciation (If shares assigned at $140.00 strike price at the March 15th options expiration): -$682.00
+($140.00 - $143.41) * 200 shares
1. Total Net Profit [If option exercised early (business day prior to the Feb. 29th ex-dividend date)]: +$246.66
= (+$928.66 options income +$0.00 dividend income -$682.00 capital appreciation); or
2. Total Net Profit (If GPC's shares assigned at $140.00 at the March 15th, 2024 expiration): +$446.66
= (+$928.66 options income +$200.00 dividend income -$682.00 capital appreciation)
1. Potential Absolute Return-on-Investment [If option exercised on business day prior to ex-dividend date]: +0.9%
= +$246.66/$27,753.34
Potential Annualized Return-on-Investment (If option exercised early): +40.5%
= (+$246.66/$27,753.34) * (365/8 days); or
2. Potential Absolute Return-on-Investment (If Genuine Parts' shares assigned on March 15th options expiration date): +1.6%
= +$446.66/$27,753.34
Potential Annualized Return-on-Investment (If shares are assigned at $140.00 at the March 15th, 2024 expiration): +25.5%
= (+$446.66/$27,753.34) * (365/23 days)
At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy. As shown below, all nine criteria are achieved for this Genuine Parts Company Covered Calls position.
