YieldBoost Essex Property Trust From 3.5% To 12.1% Using Options
June 18, 2024 at 12:50 PM EDT
Shareholders of Essex Property Trust Inc (ESS) looking to boost their income beyond the stock's 3.5% annualized dividend yield can sell the October covered call at the $290 strike and collect the premium based on the $8.10 bid, which annualizes to an additional 8.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 12.1% annualized rate in the scenario where the stock is not called away. Any upside above $290 would be lost if the stock rises there and is called away, but ESS shares would have to advance 3.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 6% return from this trading level, in addition to any dividends collected before the stock was called.