Strategy To YieldBoost Abbott Laboratories From 1.9% To 5.3% Using Options

Shareholders of Abbott Laboratories (ABT) looking to boost their income beyond the stock's 1.9% annualized dividend yield can sell the January 2017 covered call at the $55 strike and collect the premium based on the $2.53 bid, which annualizes to an additional 3.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.3% annualized rate in the scenario where the stock is not called away. Any upside above $55 would be lost if the stock rises there and is called away, but ABT shares would have to climb 9.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 14.7% return from this trading level, in addition to any dividends collected before the stock was called.