How To YieldBoost DBI To 12.4% Using Options
June 14, 2024 at 11:35 AM EDT
Shareholders of Designer Brands Inc (DBI) looking to boost their income beyond the stock's 2.8% annualized dividend yield can sell the January 2026 covered call at the $10 strike and collect the premium based on the $1.10 bid, which annualizes to an additional 9.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 12.4% annualized rate in the scenario where the stock is not called away. Any upside above $10 would be lost if the stock rises there and is called away, but DBI shares would have to advance 38.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 54% return from this trading level, in addition to any dividends collected before the stock was called.