How To YieldBoost AZZ From 1.4% To 15.2% Using Options
March 18, 2015 at 11:36 AM EDT
Shareholders of AZZ Inc (AZZ) looking to boost their income beyond the stock's 1.4% annualized dividend yield can sell the August covered call at the $45 strike and collect the premium based on the $2.60 bid, which annualizes to an additional 13.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15.2% annualized rate in the scenario where the stock is not called away. Any upside above $45 would be lost if the stock rises there and is called away, but AZZ shares would have to advance 2.3% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 8.2% return from this trading level, in addition to any dividends collected before the stock was called.