YieldBoost HRI To 21.6% Using Options
September 24, 2021 at 11:48 AM EDT
Shareholders of Herc Holdings Inc (HRI) looking to boost their income beyond the stock's 1.2% annualized dividend yield can sell the March 2022 covered call at the $170 strike and collect the premium based on the $15.30 bid, which annualizes to an additional 20.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 21.6% annualized rate in the scenario where the stock is not called away. Any upside above $170 would be lost if the stock rises there and is called away, but HRI shares would have to climb 8.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 18.2% return from this trading level, in addition to any dividends collected before the stock was called.