YieldBoost Dollar General To 5.4% Using Options
June 06, 2024 at 11:33 AM EDT
Shareholders of Dollar General Corp (DG) looking to boost their income beyond the stock's 1.8% annualized dividend yield can sell the January 2026 covered call at the $185 strike and collect the premium based on the $7.55 bid, which annualizes to an additional 3.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.4% annualized rate in the scenario where the stock is not called away. Any upside above $185 would be lost if the stock rises there and is called away, but DG shares would have to advance 41.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 47.5% return from this trading level, in addition to any dividends collected before the stock was called.