YieldBoost People's United Financial To 13.3% Using Options
December 01, 2016 at 11:52 AM EST
Shareholders of People's United Financial Inc (PBCT) looking to boost their income beyond the stock's 3.6% annualized dividend yield can sell the May 2017 covered call at the $19 strike and collect the premium based on the 85 cents bid, which annualizes to an additional 9.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.3% annualized rate in the scenario where the stock is not called away. Any upside above $19 would be lost if the stock rises there and is called away, but PBCT shares would have to advance 0.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 5% return from this trading level, in addition to any dividends collected before the stock was called.