How To YieldBoost AVY From 1.6% To 11.8% Using Options
June 17, 2024 at 11:35 AM EDT
Shareholders of Avery Dennison Corp (AVY) looking to boost their income beyond the stock's 1.6% annualized dividend yield can sell the October covered call at the $230 strike and collect the premium based on the $7.80 bid, which annualizes to an additional 10.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.8% annualized rate in the scenario where the stock is not called away. Any upside above $230 would be lost if the stock rises there and is called away, but AVY shares would have to climb 1.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 5% return from this trading level, in addition to any dividends collected before the stock was called.
