YieldBoost Materion Corp From 0.9% To 9.3% Using Options
December 31, 2014 at 11:44 AM EST
Shareholders of Materion Corp (MTRN) looking to boost their income beyond the stock's 0.9% annualized dividend yield can sell the June 2015 covered call at the $40 strike and collect the premium based on the $1.40 bid, which annualizes to an additional 8.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.3% annualized rate in the scenario where the stock is not called away. Any upside above $40 would be lost if the stock rises there and is called away, but MTRN shares would have to climb 11.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 15.1% return from this trading level, in addition to any dividends collected before the stock was called.