Strategy To YieldBoost NextEra Energy To 6.8% Using Options
June 26, 2024 at 12:01 PM EDT
Shareholders of NextEra Energy Inc (NEE) looking to boost their income beyond the stock's 2.8% annualized dividend yield can sell the January 2026 covered call at the $87.50 strike and collect the premium based on the $4.50 bid, which annualizes to an additional 4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6.8% annualized rate in the scenario where the stock is not called away. Any upside above $87.50 would be lost if the stock rises there and is called away, but NEE shares would have to advance 20.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 26.8% return from this trading level, in addition to any dividends collected before the stock was called.