YieldBoost Pitney Bowes From 4.4% To 12.4% Using Options
October 18, 2016 at 11:40 AM EDT
Shareholders of Pitney Bowes Inc (PBI) looking to boost their income beyond the stock's 4.4% annualized dividend yield can sell the April 2017 covered call at the $18 strike and collect the premium based on the 70 cents bid, which annualizes to an additional 8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 12.4% annualized rate in the scenario where the stock is not called away. Any upside above $18 would be lost if the stock rises there and is called away, but PBI shares would have to climb 4.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 8.5% return from this trading level, in addition to any dividends collected before the stock was called.