YieldBoost XEL To 13.9% Using Options
August 23, 2021 at 11:35 AM EDT
Shareholders of Xcel Energy Inc (XEL) looking to boost their income beyond the stock's 2.6% annualized dividend yield can sell the December covered call at the $70 strike and collect the premium based on the $2.50 bid, which annualizes to an additional 11.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.9% annualized rate in the scenario where the stock is not called away. Any upside above $70 would be lost if the stock rises there and is called away, but XEL shares would have to climb 0.1% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 3.7% return from this trading level, in addition to any dividends collected before the stock was called.