YieldBoost Brooks Automation To 14.8% Using Options
March 05, 2015 at 11:34 AM EST
Shareholders of Brooks Automation Inc (BRKS) looking to boost their income beyond the stock's 3.4% annualized dividend yield can sell the July covered call at the $12.50 strike and collect the premium based on the 50 cents bid, which annualizes to an additional 11.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 14.8% annualized rate in the scenario where the stock is not called away. Any upside above $12.50 would be lost if the stock rises there and is called away, but BRKS shares would have to advance 4.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 9% return from this trading level, in addition to any dividends collected before the stock was called.