YieldBoost PPL To 11% Using Options
June 14, 2024 at 11:35 AM EDT
Shareholders of PPL Corp (PPL) looking to boost their income beyond the stock's 3.7% annualized dividend yield can sell the October covered call at the $29 strike and collect the premium based on the 70 cents bid, which annualizes to an additional 7.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11% annualized rate in the scenario where the stock is not called away. Any upside above $29 would be lost if the stock rises there and is called away, but PPL shares would have to advance 4.1% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 6.6% return from this trading level, in addition to any dividends collected before the stock was called.