This position uses the Covered Calls Advisor's Dividend Capture Strategy (see here) since Amdocs Ltd. has an upcoming quarterly ex-dividend of $.48 per share (2.1% annual dividend yield) one week from today on March 27th which is prior to the April 19th options expiration date. I am encouraged by the increase in their annual dividend from $.40 last year to $.44 now (a 9.0% increase). This dividend is included in the detailed return-on-investment calculations below. Either an early assignment on March 26th (the last trading day prior to the March 27th ex-dividend date) or on the April 19th options expiration date would provide a satisfactory annualized return on investment result for this 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. The Delta for these Call options was approximately 67.6 when this position was established which approximates the probability of 67.6% that the position will be in-the-money at market close on the options expiration date. Also, importantly to the Covered Calls Advisor, there is no quarterly earnings report prior to the options expiration date since the next earnings report on May 15th, 2024 is after the April 19th options expiration date.
Amdocs Ltd. provides software and services primarily to communications and media companies worldwide. Their services include end-to-end integration, digital business operations, engineering support, cloud services, and consulting services. According to LSEG (Refinitiv), there are 15 analysts covering Amdocs Ltd. and their current average Target Price is $104.90 which is +14.6% above today's stock purchase price. Another reason for establishing this position was that Amdocs is highly ranked in my Stock Rover Overall stock screener since it met all 14 filters (see chart below). It also met all 18 filters in my Quality+Value+Growth stock screener.
As detailed below, two potential return-on-investment results for this Amdocs Ltd. in-the-money Covered Calls position are:
- +1.2% absolute return-on-investment (equivalent to +64.1% annualized
return-on-investment for the next 7 days) if the stock is assigned early (on the last business day
prior to the March 27th ex-dividend date); or
- +1.8% absolute return-on-investment (equivalent to +21.5% annualized return-on-investment over the next 30 days) if the stock is assigned on the April 19th, 2024 options expiration date.
The buy/write transaction was:
3/20/2024 Bought 200 Amdocs Ltd. shares @ $91.53.
3/20/2024 Sold 2 DOX 4/19/2024 $90.00 Call options @ $2.63 per share.
3/27/2024 Upcoming annual ex-dividend of $.48 per share.
Two possible overall performance results (including commissions) for this Amdocs Ltd. Covered Calls position are as follows:
Covered Calls Net Investment: $17,781.34
= ($91.53 - $2.63) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$524.66
= ($2.63 * 200 shares) - $1.34 commission
(b) Dividend Income (If Amdocs Call options exercised early on March 26th, 2024, the last business day prior to the March 27th ex-div date): +$0.00; or
(b) Dividend Income (If stock assigned at the April 19th, 2024 options expiration date): +$96.00
= ($.48 dividend per share x 200 shares)
(c) Capital Appreciation (If Amdocs' Call options assigned early on March 27th): -$306.00
+($90.00 strike price - $91.53 stock purchase price) * 200 shares; or(c) Capital Appreciation (If shares assigned at $90.00 strike price at the April 19th options expiration): -$306.00
+($90.00 - $91.53) * 200 shares
1. Total Net Profit [If option exercised early (business day prior to the March 27th ex-dividend date)]: +$218.66
= (+$524.66 options income +$0.00 dividend income -$306.00 capital appreciation); or
2. Total Net Profit (If Amdocs' shares assigned at $90.00 at the April 19th, 2024 expiration): +$314.66
= (+$524.66 options income +$96.00 dividend income -$306.00 capital appreciation)
1. Potential Absolute Return-on-Investment [If option exercised on business day prior to the March 27th, 2024 ex-dividend date]: +1.2%
= +$218.66/$17,781.34
Potential Annualized Return-on-Investment (If option exercised early): +64.1%
= (+$218.66/$17,781.34) * (365/7 days); or
2. Potential Absolute Return-on-Investment (If Amdocs' shares assigned on the April 19th options expiration date): +1.8%
= +$314.66/$17,781.34
Potential Annualized Return-on-Investment (If shares are assigned at $90.00 at the April 19th, 2024 options expiration date): +21.5%
= (+$314.66/$17,781.34) * (365/30 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 Amdocs Ltd. Covered Calls position.
