YieldBoost Nielsen Holdings From 0.6% To 15.5% Using Options
January 21, 2016 at 11:58 AM EST
Shareholders of Nielsen Holdings PLC (NLSN) looking to boost their income beyond the stock's 0.6% annualized dividend yield can sell the May covered call at the $45 strike and collect the premium based on the $2.15 bid, which annualizes to an additional 14.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15.5% annualized rate in the scenario where the stock is not called away. Any upside above $45 would be lost if the stock rises there and is called away, but NLSN shares would have to climb 2.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 7.1% return from this trading level, in addition to any dividends collected before the stock was called.