Strategy To YieldBoost HI From 2.5% To 39.8% Using Options

Shareholders of Hillenbrand Inc (HI) looking to boost their income beyond the stock's 2.5% annualized dividend yield can sell the November covered call at the $35 strike and collect the premium based on the 10 cents bid, which annualizes to an additional 37.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 39.8% annualized rate in the scenario where the stock is not called away. Any upside above $35 would be lost if the stock rises there and is called away, but HI shares would have to advance 7.4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 7.7% return from this trading level, in addition to any dividends collected before the stock was called.