YieldBoost Computer Programs & Systems From 3.6% To 7.5% 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 June 2015 covered call at the $75 strike and collect the premium based on the $1.50 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 7.5% 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 advance 19.3% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 21.7% return from this trading level, in addition to any dividends collected before the stock was called.