I was really happy with the annual dividend from my DIS shares back in December. Then last week a colleague pointed out that stock NVS was due for an annual dividend payment with an ex-date of February 27. Having enough funds in my reserve to move quickly on a 100 share position, I pulled the trigger on Friday to be sure I would be a shareholder in time for this dividend of $246 – nearly 4.3%.
It's a hasty trade and there is a little more risk than I usually have taken on with Rescue My IRA positions. However, I’ll plan to exit these shares as soon as possible, and at a handsome short-term profit,if possible, owing to the dividend. I have a standing order in to BTC the option once the stock price is adjusted for the ex-dividend, and I will either adjust into a new contract or sell the shares outright after that.
Analysis follows:
NVS
2/25/2012 Bought 100 shares at average share price $57.36 (total $5,736.00)
2./25/2012 Sold 1 NVS Mar 2012 $57.50 at $0.30 (total $21.74)
Net Profit:
1) Options Income: = $21.74
2) Dividend Income: Ex-date is 2/27, $246.00
3) Capital Appreciation if assigned at $57.50: -$3.11
2/25/2012 Bought 100 shares at average share price $57.36 (total $5,736.00)
2./25/2012 Sold 1 NVS Mar 2012 $57.50 at $0.30 (total $21.74)
Net Profit:
1) Options Income: = $21.74
2) Dividend Income: Ex-date is 2/27, $246.00
3) Capital Appreciation if assigned at $57.50: -$3.11
Total Net Profit if Assigned and dividend collected: $21.74 + $246 - $3.11 = $264.63
Absolute Return on Investment: ($264.63/$5,736.00) = 4.61%
Annualized Return if Assigned (30 days): 4.61%*(365/30) = 56.13%
Friday's closing price was just barely out of the money.
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