Shareholders of Pinnacle West Capital Corp. (PNW) looking to boost their income beyond the stock's 4.3% annualized dividend yield can sell the April 2014 covered call at the $55 strike and collect the premium based on the 20 cents bid, which annualizes to an additional 1.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.4% annualized rate in the scenario where the stock is not called away. Any upside above $55 would be lost if the stock rises there and is called away, but PNW shares would have to advance 3% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 3.4% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost Pinnacle West Capital To 5.4% Using Options
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