Calgary, Alberta-based Enbridge (ENB) trades ex-dividend tomorrow, August 12. This means that shareholders who own the stock through today’s close will earn the dividend of $0.6732 per share from the company which lists on both the New York Stock Exchange and Toronto Stock Exchange. Just ahead of the ex-dividend date, a buy write on the ENB as outlined below looks attractive today.
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Enbridge (ENB) – Buy Write
Buy 100 ENB
Sell to Open 1 September 16 $45 Call
Execute for Net Debit of $43.75 or lower
Calgary, Alberta-based oil and gas distribution giant Enbridge (ENB) expects revenue this year to grow 9.7% to $40.6 billion and earnings to increase 6.4% to $2.29 per share. The next earnings report is not until the first week of November.
Enbridge has an enviable dividend history with a track record of rising payouts going back to the 1980s. There is an ex-dividend date tomorrow, meaning that today is the last trading day to buy the stock and still earn the dividend of more than $0.67 per share. We can earn at least another $0.45 selling $45 call options that expire in 36 days.
Here is the buy write: Buy 100 ENB ($44.18 current price), and sell to open one contract of ENB’s $45 September 16 calls for a net debit of $43.75 or lower.
For the buy write, if ENB closes above $45.00 on September 16, these calls will be assigned which means we would be compelled to sell our shares at $45.00. If we earn tomorrow’s dividend, this would result in a profit of $1.92 per share on $43.75 per share risked today for a total return of 4.39%. Over a period of 36 days, the annualized return would be 44.5%. If ENB closes at or below $45.00 on September 16, we would still own it at a cost basis of $43.08 per share, reflecting the benefit of tomorrow’s dividend.
Options income for this trade: We earn $45 selling 1 ENB September 16 $45.00 call contract. Click here for updated bid-ask and return characteristics.
John Dobosz is editor of Forbes Dividend Investor, which provides a weekly portfolio of high-yielding, value-priced income stocks, REITs and MLPs, and Forbes Premium Income Report, which sends out options-selling trade recommendations on two dividend-paying stocks every Tuesday and Thursday.
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 by Forbes Media LLC.
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