Strategy To YieldBoost DOC From 5.4% To 17.7% Using Options
September 18, 2024 at 11:39 AM EDT
Shareholders of Healthpeak Properties Inc (DOC) looking to boost their income beyond the stock's 5.4% annualized dividend yield can sell the January 2025 covered call at the $22.50 strike and collect the premium based on the 90 cents bid, which annualizes to an additional 12.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 17.7% annualized rate in the scenario where the stock is not called away. Any upside above $22.50 would be lost if the stock rises there and is called away, but DOC shares would have to climb 1.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 5.8% return from this trading level, in addition to any dividends collected before the stock was called.