How To YieldBoost Zimmer Biomet Holdings From 0.9% To 4.9% Using Options
July 17, 2024 at 12:16 PM EDT
Shareholders of Zimmer Biomet Holdings Inc (ZBH) looking to boost their income beyond the stock's 0.9% annualized dividend yield can sell the January 2026 covered call at the $135 strike and collect the premium based on the $6.70 bid, which annualizes to an additional 4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 4.9% annualized rate in the scenario where the stock is not called away. Any upside above $135 would be lost if the stock rises there and is called away, but ZBH shares would have to climb 21.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 27.2% return from this trading level, in addition to any dividends collected before the stock was called.
