YieldBoost OFG Bancorp From 1.7% To 16.1% Using Options
December 09, 2016 at 11:34 AM EST
Shareholders of OFG Bancorp (OFG) looking to boost their income beyond the stock's 1.7% annualized dividend yield can sell the May 2017 covered call at the $15 strike and collect the premium based on the 90 cents bid, which annualizes to an additional 14.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 16.1% annualized rate in the scenario where the stock is not called away. Any upside above $15 would be lost if the stock rises there and is called away, but OFG shares would have to advance 6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 12.4% return from this trading level, in addition to any dividends collected before the stock was called.