McKesson Corporation (MCK), a company that delivers pharmaceuticals, medical supplies and healthcare information technologies, announced in July that it was raising its quarterly dividend from $0.20 per share to $0.24. The stock will go ex-dividend this Thursday, August 29.
The new dividend will only be paid to investors who own or buy the stock prior to that day. Therefore, in order to get the new dividend, investors must place their orders prior to Thursday, which means that the stock will likely trade up during the first half of the week, with dividend traders moving in to take advantage of the 20% dividend hike.
Still Signs of Bullish Technical Indicators
MCK stock has also been a strong performer this year, having traded up 26.4% year to date.
MCK was trading at $122.95 on Friday, down $3.41 from its 12-month high and $38.30 above its 12-month low. Technical indicators for MCK are bullish with support above $115.00 and resistance below $125.00.
Of the 13 analysts who cover the stock seven rate it a “strong buy”, and six rate it a “hold”. The stock presently receives a consensus rating of “Buy” and an average target price of $126.55.
At MCK’s current price, the stock is paying an annual dividend of 0.8% using a recently raised dividend amount. This higher dividend will help MCK maintain the strength it has enjoyed during the first half of the year.
With the incentive for stock ownership to receive the dividend increase, the bullish indicators that are present and the backing of the analyst crowd, the options trade is certainly looking good and will provide a 67% profit when the target is reached.
Therefore, based on the facts above the following options trade is recommended.
Options Trade: Buy the MCK Nov 2013 130.000 call (MCK131116C00130000) at or under $1.50, good for the day. Place a protective stop limit at $0.60 and a pre-determined sell at $2.50.
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