How To YieldBoost Mid-America Apartment Communities To 13.8% Using Options
August 15, 2024 at 11:37 AM EDT
Shareholders of Mid-America Apartment Communities Inc (MAA) looking to boost their income beyond the stock's 3.9% annualized dividend yield can sell the December covered call at the $155 strike and collect the premium based on the $5.30 bid, which annualizes to an additional 10% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.8% annualized rate in the scenario where the stock is not called away. Any upside above $155 would be lost if the stock rises there and is called away, but MAA shares would have to climb 1.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 4.9% return from this trading level, in addition to any dividends collected before the stock was called.