Strategy To YieldBoost AZZ To 10.9% Using Options

Shareholders of AZZ Inc (AZZ) looking to boost their income beyond the stock's 1.4% annualized dividend yield can sell the May 2018 covered call at the $50 strike and collect the premium based on the $2.65 bid, which annualizes to an additional 9.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.9% annualized rate in the scenario where the stock is not called away. Any upside above $50 would be lost if the stock rises there and is called away, but AZZ shares would have to climb 6.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 12.1% return from this trading level, in addition to any dividends collected before the stock was called.