Shareholders of Methode Electronics, Inc. (MEI) looking to boost their income beyond the stock's 1% annualized dividend yield can sell the January 2014 covered call at the $30 strike and collect the premium based on the $1.75 bid, which annualizes to an additional 21% 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 $30 would be lost if the stock rises there and is called away, but MEI shares would have to advance 6.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 12.9% return from this trading level, in addition to any dividends collected before the stock was called.
How To YieldBoost MEI To 22%
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