YieldBoost Coca-Cola Enterprises From 2.3% To 3.4% Using Options
April 20, 2016 at 13:05 PM EDT
Shareholders of Coca-Cola Enterprises Inc (CCE) looking to boost their income beyond the stock's 2.3% annualized dividend yield can sell the January 2018 covered call at the $65 strike and collect the premium based on the $1.05 bid, which annualizes to an additional 1.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 3.4% annualized rate in the scenario where the stock is not called away. Any upside above $65 would be lost if the stock rises there and is called away, but CCE shares would have to advance 23.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 25.8% return from this trading level, in addition to any dividends collected before the stock was called.