YieldBoost Windstream Holdings To 14% Using Options
July 24, 2014 at 12:02 PM EDT
Shareholders of Windstream Holdings Inc (WIN) looking to boost their income beyond the stock's 9.6% annualized dividend yield can sell the January 2015 covered call at the $11 strike and collect the premium based on the 22 cents bid, which annualizes to an additional 4.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 14% annualized rate in the scenario where the stock is not called away. Any upside above $11 would be lost if the stock rises there and is called away, but WIN shares would have to advance 6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 8.1% return from this trading level, in addition to any dividends collected before the stock was called.