How To YieldBoost International Game Technology From 3.9% To 9.2% Using Options
June 21, 2024 at 14:03 PM EDT
Shareholders of International Game Technology PLC (IGT) looking to boost their income beyond the stock's 3.9% annualized dividend yield can sell the January 2026 covered call at the $28 strike and collect the premium based on the $1.70 bid, which annualizes to an additional 5.3% 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 $28 would be lost if the stock rises there and is called away, but IGT shares would have to climb 36.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 45% return from this trading level, in addition to any dividends collected before the stock was called.