How To YieldBoost DIN To 15.2% Using Options
April 08, 2024 at 11:33 AM EDT
Shareholders of Dine Brands Global Inc (DIN) looking to boost their income beyond the stock's 4.6% annualized dividend yield can sell the September covered call at the $50 strike and collect the premium based on the $2.10 bid, which annualizes to an additional 10.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15.2% annualized rate in the scenario where the stock is not called away. Any upside above $50 would be lost if the stock rises there and is called away, but DIN shares would have to advance 13.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 18.4% return from this trading level, in addition to any dividends collected before the stock was called.