YieldBoost HNI Corp To 16.4% Using Options
December 14, 2017 at 11:39 AM EST
Shareholders of HNI Corp (HNI) looking to boost their income beyond the stock's 3.3% annualized dividend yield can sell the July 2018 covered call at the $35 strike and collect the premium based on the $2.70 bid, which annualizes to an additional 13.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 16.4% annualized rate in the scenario where the stock is not called away. Any upside above $35 would be lost if the stock rises there and is called away, but HNI shares would have to advance 1.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 9.6% return from this trading level, in addition to any dividends collected before the stock was called.