Running the wheel strategy on dividend-paying stocks creates a "Double Income" opportunity, but it also introduces Dividend Assignment Risk.
When you own the underlying shares in Phase 3 (Covered Calls), you collect all regular dividends declared by the company. This cash immediately lowers your Adjusted Cost Basis.
However, if your short Call option goes In-The-Money as the ex-dividend date approaches, the option buyer may exercise the call early entirely to capture the dividend payment for themselves. You must be prepared to have your shares called away prematurely during dividend weeks.
To manage this: check your short call's extrinsic value before the ex-dividend date. If the remaining extrinsic value is less than the dividend amount, early assignment is likely and you should consider rolling the call up or out proactively.