YieldBoost SL Green Realty Corp From 2.5% To 12.6% Using Options
September 23, 2016 at 11:45 AM EDT
Shareholders of SL Green Realty Corp (SLG) looking to boost their income beyond the stock's 2.5% annualized dividend yield can sell the February 2017 covered call at the $115 strike and collect the premium based on the $4.60 bid, which annualizes to an additional 10% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 12.6% annualized rate in the scenario where the stock is not called away. Any upside above $115 would be lost if the stock rises there and is called away, but SLG shares would have to advance 1.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 5.2% return from this trading level, in addition to any dividends collected before the stock was called.