YieldBoost Computer Programs & Systems To 9.2% Using Options

Shareholders of Computer Programs & Systems Inc (CPSI) looking to boost their income beyond the stock's 3.6% annualized dividend yield can sell the March 2015 covered call at the $75 strike and collect the premium based on the $2.15 bid, which annualizes to an additional 5.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.2% annualized rate in the scenario where the stock is not called away. Any upside above $75 would be lost if the stock rises there and is called away, but CPSI shares would have to climb 19.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 23.2% return from this trading level, in addition to any dividends collected before the stock was called.