How To YieldBoost KBR From 1.8% To 4.9% Using Options

Shareholders of KBR Inc (KBR) looking to boost their income beyond the stock's 1.8% annualized dividend yield can sell the January 2016 covered call at the $25 strike and collect the premium based on the 70 cents bid, which annualizes to an additional 3.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 4.9% annualized rate in the scenario where the stock is not called away. Any upside above $25 would be lost if the stock rises there and is called away, but KBR shares would have to advance 39.4% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 43.3% return from this trading level, in addition to any dividends collected before the stock was called.