YieldBoost BDN From 11% To 22% Using Options
September 17, 2024 at 11:39 AM EDT
Shareholders of Brandywine Realty Trust (BDN) looking to boost their income beyond the stock's 11% annualized dividend yield can sell the January 2025 covered call at the $6 strike and collect the premium based on the 20 cents bid, which annualizes to an additional 11% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 22% annualized rate in the scenario where the stock is not called away. Any upside above $6 would be lost if the stock rises there and is called away, but BDN shares would have to advance 10.1% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 13.8% return from this trading level, in addition to any dividends collected before the stock was called.