YieldBoost Badger Meter From 0.8% To 101% Using Options
October 13, 2021 at 11:42 AM EDT
Shareholders of Badger Meter Inc (BMI) looking to boost their income beyond the stock's 0.8% annualized dividend yield can sell the October covered call at the $105 strike and collect the premium based on the 55 cents bid, which annualizes to an additional 100.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 101% annualized rate in the scenario where the stock is not called away. Any upside above $105 would be lost if the stock rises there and is called away, but BMI shares would have to advance 4.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 5.4% return from this trading level, in addition to any dividends collected before the stock was called.
