How To YieldBoost YUM From 2% To 5.8% Using Options

Shareholders of Yum! Brands Inc (YUM) looking to boost their income beyond the stock's 2% annualized dividend yield can sell the January 2025 covered call at the $150 strike and collect the premium based on the $3.10 bid, which annualizes to an additional 3.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.8% annualized rate in the scenario where the stock is not called away. Any upside above $150 would be lost if the stock rises there and is called away, but YUM shares would have to advance 10.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 12.5% return from this trading level, in addition to any dividends collected before the stock was called.