YieldBoost CSX From 1.5% To 5.2% Using Options
March 29, 2017 at 13:34 PM EDT
Shareholders of CSX Corp (CSX) looking to boost their income beyond the stock's 1.5% annualized dividend yield can sell the January 2019 covered call at the $57.50 strike and collect the premium based on the $3.10 bid, which annualizes to an additional 3.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.2% annualized rate in the scenario where the stock is not called away. Any upside above $57.50 would be lost if the stock rises there and is called away, but CSX shares would have to climb 22.3% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 28.9% return from this trading level, in addition to any dividends collected before the stock was called.