Shareholders of McGrath RentCorp (MGRC) looking to boost their income beyond the stock's 2.7% annualized dividend yield can sell the March 2015 covered call at the $40 strike and collect the premium based on the $1.40 bid, which annualizes to an additional 6.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.1% annualized rate in the scenario where the stock is not called away. Any upside above $40 would be lost if the stock rises there and is called away, but MGRC 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 13.3% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost McGrath RentCorp To 9.1% Using Options
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