[For the full motivation behind this trade please see the August edition of Canadian Edge]

Thomson Reuters Ltd. (TSX: TRI, NYSE: TRI) is a true-blue Dividend Champion. However, the company’s most recent results indicate that it’s hit a dry patch and may struggle to grow profits over the next few quarters.

The firm also recently sold one of its core divisions, which leaves a profit hole that will only be partly filled by share buybacks and interest savings on debt reduction.

Meanwhile, the stock has performed well over the past two years, gaining about 35%. That brings its valuation closer to international peers, but also pushes its dividend yield lower, recently at around 3.3%. We don’t see much upside potential from here and expect the stock price to move sideways for the foreseeable future, at best.

Sell to open a covered call on Thomson Reuters stock.

Call Option: November C$58 Call (expires on 11/18/2016)

Option Symbol: TRI161118C00058000

Limit Order Price: C$0.55 or more

Income generated: C$55 per options contract (representing 100 shares of stock) will be deposited into your brokerage account immediately.

Return: 101-day (Aug. 9 through Nov. 18 expiration date) yield at current stock price of C$54.80 is 2.6% (9.8% annualized). This includes two dividends received on the long position in the stock during the holding period.

The option information above relates to the Canadian listing for Thomson Reuters. The trade can also be done on the U.S. market using the October contract with a strike price of US$45.

If you use an online broker, please consult their options order page for an explanation of how to enter these instructions on their website.

You can only sell one call option per 100 shares of Thomson Reuters stock that you currently own.

And the trade can only be done in 100-share increments (100, 200, 300, etc.).