YieldBoost Limoneira From 1.2% To 13.5% Using Options
June 01, 2017 at 11:41 AM EDT
Shareholders of Limoneira Co (LMNR) looking to boost their income beyond the stock's 1.2% annualized dividend yield can sell the September covered call at the $20 strike and collect the premium based on the 65 cents bid, which annualizes to an additional 12.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.5% annualized rate in the scenario where the stock is not called away. Any upside above $20 would be lost if the stock rises there and is called away, but LMNR shares would have to advance 9.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 13.3% return from this trading level, in addition to any dividends collected before the stock was called.