How To YieldBoost AIZ From 2.4% To 15.1% Using Options
December 01, 2016 at 11:55 AM EST
Shareholders of Assurant Inc (AIZ) looking to boost their income beyond the stock's 2.4% annualized dividend yield can sell the March 2017 covered call at the $87.50 strike and collect the premium based on the $3.20 bid, which annualizes to an additional 12.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15.1% annualized rate in the scenario where the stock is not called away. Any upside above $87.50 would be lost if the stock rises there and is called away, but AIZ shares would have to climb 0.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 4.2% return from this trading level, in addition to any dividends collected before the stock was called.