YieldBoost Southern Company To 7% Using Options

Shareholders of Southern Company (SO) looking to boost their income beyond the stock's 4.6% annualized dividend yield can sell the January 2018 covered call at the $52.50 strike and collect the premium based on the 86 cents bid, which annualizes to an additional 2.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 7% annualized rate in the scenario where the stock is not called away. Any upside above $52.50 would be lost if the stock rises there and is called away, but SO shares would have to climb 4.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 6.3% return from this trading level, in addition to any dividends collected before the stock was called.