How To YieldBoost PDM To 19.1% Using Options
May 10, 2024 at 11:48 AM EDT
Shareholders of Piedmont Office Realty Trust Inc (PDM) looking to boost their income beyond the stock's 7.3% annualized dividend yield can sell the December covered call at the $7.50 strike and collect the premium based on the 50 cents bid, which annualizes to an additional 11.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 19.1% annualized rate in the scenario where the stock is not called away. Any upside above $7.50 would be lost if the stock rises there and is called away, but PDM shares would have to climb 9% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 16.3% return from this trading level, in addition to any dividends collected before the stock was called.