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 Chesapeake Energy Corp., looking at the dividend history chart for CHK 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 1.4% annualized dividend yield.
Turning to the other side of the option chain, we highlight one call contract of particular interest for the May expiration, for shareholders of Chesapeake Energy Corp. (CHK) looking to boost their income beyond the stock's 1.4% annualized dividend yield. Selling the covered call at the $25 strike and collecting the premium based on the 95 cents bid, annualizes to an additional 30.4% 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 31.8% annualized rate in the scenario where the stock is not called away. Any upside above $25 would be lost if the stock rises there and is called away, but CHK shares would have to climb 0.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 4.6% return from this trading level, in addition to any dividends collected before the stock was called.
The chart below shows the trailing twelve month trading history for Chesapeake Energy Corp., highlighting in green where the $23 strike is located relative to that history, and highlighting the $25 strike in red:
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