Shareholders of Stein Mart, Inc. (SMRT) looking to boost their income beyond the stock's 1.4% annualized dividend yield can sell the May 2014 covered call at the $15 strike and collect the premium based on the $1.00 bid, which annualizes to an additional 11.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.4% annualized rate in the scenario where the stock is not called away. Any upside above $15 would be lost if the stock rises there and is called away, but SMRT shares would have to advance 9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 16.3% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost Stein Mart To 13.4%
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