YieldBoost PRGO From 0.8% To 4.7% Using Options
November 08, 2017 at 11:42 AM EST
Shareholders of Perrigo Company plc (PRGO) looking to boost their income beyond the stock's 0.8% annualized dividend yield can sell the January 2019 covered call at the $100 strike and collect the premium based on the $3.80 bid, which annualizes to an additional 3.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 4.7% annualized rate in the scenario where the stock is not called away. Any upside above $100 would be lost if the stock rises there and is called away, but PRGO shares would have to climb 23.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 28.3% return from this trading level, in addition to any dividends collected before the stock was called.