YieldBoost Turning Point Brands To 17.4% Using Options
October 08, 2021 at 11:37 AM EDT
Shareholders of Turning Point Brands Inc (TPB) looking to boost their income beyond the stock's 0.5% annualized dividend yield can sell the April 2022 covered call at the $50 strike and collect the premium based on the $4.20 bid, which annualizes to an additional 16.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 17.4% 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 TPB shares would have to advance 3.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 12.3% return from this trading level, in addition to any dividends collected before the stock was called.