YieldBoost HI To 15.3% Using Options
December 08, 2021 at 12:04 PM EST
Shareholders of Hillenbrand Inc (HI) looking to boost their income beyond the stock's 1.7% annualized dividend yield can sell the April 2022 covered call at the $55 strike and collect the premium based on the $2.40 bid, which annualizes to an additional 13.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15.3% annualized rate in the scenario where the stock is not called away. Any upside above $55 would be lost if the stock rises there and is called away, but HI shares would have to advance 8.1% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 12.9% return from this trading level, in addition to any dividends collected before the stock was called.