YieldBoost Dana From 1.8% To 20.2% Using Options
August 01, 2016 at 11:39 AM EDT
Shareholders of Dana Inc (DAN) looking to boost their income beyond the stock's 1.8% annualized dividend yield can sell the December covered call at the $14 strike and collect the premium based on the 95 cents bid, which annualizes to an additional 18.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 20.2% annualized rate in the scenario where the stock is not called away. Any upside above $14 would be lost if the stock rises there and is called away, but DAN shares would have to advance 2.1% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 9.1% return from this trading level, in addition to any dividends collected before the stock was called.