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One Put, One Call Option To Know About For Wal-Mart Stores

Always important when discussing dividends is the fact that, in general, dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company. In the case of Wal-Mart Stores, Inc., looking at the dividend history chart for WMT below can help in judging whether the most recent dividend is likely to continue, and in turn whether it is a reasonable expectation to expect a 2.3% annualized dividend yield.

WMT+Dividend+History+Chart

Turning to the other side of the option chain, we highlight one call contract of particular interest for the January 2014 expiration, for shareholders of Wal-Mart Stores, Inc. (WMT) looking to boost their income beyond the stock's 2.3% annualized dividend yield. Selling the covered call at the $82.50 strike and collecting the premium based on the 46 cents bid, annualizes to an additional 3.9% rate of return against the current stock price (this is what we at Stock Options Channel refer to as the YieldBoost), for a total of 6.2% annualized rate in the scenario where the stock is not called away. Any upside above $82.50 would be lost if the stock rises there and is called away, but WMT shares would have to climb 2.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 3.1% return from this trading level, in addition to any dividends collected before the stock was called.

START SLIDESHOW:
Top YieldBoost WMT Calls »

The chart below shows the trailing twelve month trading history for Wal-Mart Stores, Inc., highlighting in green where the $77.50 strike is located relative to that history, and highlighting the $82.50 strike in red:

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