Writing Calls And Buying H&R Block Now For Dividend Tomorrow

Tax preparation firm H&R Block (HRB) has been a stellar performer in the Forbes Dividend Investor portfolio since January and it trades ex-dividend tomorrow. If you execute this trade before the close you’ll earn the $0.29 per share dividend.

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H&R Block (HRB) – Buy Write

Buy 100 HRB

Sell to Open 1 October 21 $45 Calls

Execute for Net Debit of $42.60 or lower

Kansas City, Mo.-based H&R Block (HRB) is a tax preparation firm in the U.S., Canada, and Australia, offering assisted and do-it-yourself tax return preparation services through multiple channels that also distribute H&R block-branded financial products and services.

Revenue is expected to grow 2.7% this year, with earnings up 7%. The stock has not lost much during the current market selloff.

Here is the buy write: Buy 100 HRB ($44.23 current price), and sell to open 1 contract of $45 October 21 calls for a net debit (stock price minus options premium) of $42.60 or lower.

If HRB closes above $45 at expiration, we would earn $2.69 per share (including the dividend) on $42.60 per share at risk, or 6.3%. Over 45 days, that would be 51.2% on an annualized basis. If HRB closes at or below $45 at expiration, we will still own the stock at a cost basis of $42.31 per share, reflecting the premium earned today and the dividend tomorrow.

Options income for this trade: We earn $163 selling 1 HRB October 21 $45 call contract. Click here for updated bid-ask and return characteristics.

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