YieldBoost Xerox Holdings From 9% To 22.4% Using Options
July 30, 2024 at 11:43 AM EDT
Shareholders of Xerox Holdings Corp (XRX) looking to boost their income beyond the stock's 9% annualized dividend yield can sell the January 2025 covered call at the $13 strike and collect the premium based on the 70 cents bid, which annualizes to an additional 13.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 22.4% annualized rate in the scenario where the stock is not called away. Any upside above $13 would be lost if the stock rises there and is called away, but XRX shares would have to advance 16.9% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 23.2% return from this trading level, in addition to any dividends collected before the stock was called.