Grabbing Fat Dividend From Verizon With 17-Day Buy Write

This buy write on Verizon Communications

VZ
(VZ) is designed to earn a $0.6525 per share dividend on October 6 . We will be writing October 14 weekly calls because Verizon reports earnings on October 21.

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Verizon Communications (VZ) – Buy Write

Buy 100 VZ

Sell to Open 1 October 14 $39 Call

Execute for Net Debit of $38.20 or lower

Shares of New York-based Verizon Communications (VZ) trade at their lowest levels since May 2018, and the stock yields a rich 6.7%. Revenue this year is forecast to climb 2.1% to $136.4 billion, and earnings are expected to decline 4.2% to $5.16 per share.

At 7.5 times year-ahead earnings, Verizon trades at a 33% discount to its five-year average forward price-earnings ratio of 11.1. Similarly, as a multiple of sales, the stock trades at a 29% discount to its five-year average price-sales ratio.

We will buy the stock and write calls that expire in 17 days, a period of time which should see us collect the dividend.

Here is the buy write: Buy 100 VZ ($39.05 current price), and sell to open one contract of $39 October 14 (weekly) calls. Placing your order as a combined buy write, use a net debit (stock price minus premium) of $38.25 or lower.

If VZ rallies sharply, we could be assigned early, just before the October 6 ex-dividend date, in which case we would earn $0.75 per share. If we earn the dividend, and if VZ closes above $39.00 on October 14, we would earn $1.4025 per share on $38.25 at risk, or 3.67%. Over 17 days, that would be 78.7% on an annualized basis. If Verizon closes below $39.00 on October 14, we will still own the stock at a cost basis of $38.5975 per share.

Options income for this trade: We earn $80 selling 1 VZ October 14 $39 call contract. Click here for updated bid-ask and return characteristics.

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NOTE: Forbes Premium Income Report is intended to provide information to interested parties. As we have no knowledge of individual circumstances, goals and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any assets or securities mentioned or recommended. We do not guarantee that investments mentioned in this newsletter will produce profits or that they will equal past performance. Although all content is derived from data believed to be reliable, accuracy cannot be guaranteed. John Dobosz and members of the staff of Forbes Premium Income Report may hold positions in some or all the assets/securities listed. Copyright 2022

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