Strategy To YieldBoost Turning Point Brands From 0.9% To 14.7% Using Options
June 25, 2024 at 11:37 AM EDT
Shareholders of Turning Point Brands Inc (TPB) looking to boost their income beyond the stock's 0.9% annualized dividend yield can sell the December covered call at the $35 strike and collect the premium based on the $2.15 bid, which annualizes to an additional 13.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 14.7% 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 TPB shares would have to climb 9.7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 16.4% return from this trading level, in addition to any dividends collected before the stock was called.