Shareholders of Sterling Bancorp (STL) looking to boost their income beyond the stock's 2.4% annualized dividend yield can sell the May covered call at the $12.50 strike and collect the premium based on the 5 cents bid, which annualizes to an additional 31.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 34.4% annualized rate in the scenario where the stock is not called away. Any upside above $12.50 would be lost if the stock rises there and is called away, but STL shares would have to climb 9.4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 9.8% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost Sterling Bancorp From 2.4% To 34.4% Using Options
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