Strategy To YieldBoost H&E Equipment Services To 12.5% Using Options
December 29, 2014 at 11:43 AM EST
Shareholders of H&E Equipment Services Inc (HEES) looking to boost their income beyond the stock's 3.4% annualized dividend yield can sell the August 2015 covered call at the $35 strike and collect the premium based on the $1.70 bid, which annualizes to an additional 9.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 12.5% annualized rate in the scenario where the stock is not called away. Any upside above $35 would be lost if the stock rises there and is called away, but HEES shares would have to climb 20.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 26.1% return from this trading level, in addition to any dividends collected before the stock was called.