YieldBoost RL From 1.6% To 5.5% Using Options
March 21, 2024 at 11:47 AM EDT
Shareholders of Ralph Lauren Corp (RL) looking to boost their income beyond the stock's 1.6% annualized dividend yield can sell the January 2026 covered call at the $260 strike and collect the premium based on the $13.60 bid, which annualizes to an additional 3.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.5% annualized rate in the scenario where the stock is not called away. Any upside above $260 would be lost if the stock rises there and is called away, but RL shares would have to climb 36.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 43.8% return from this trading level, in addition to any dividends collected before the stock was called.