YieldBoost PLD To 7.5% Using Options
July 02, 2024 at 12:20 PM EDT
Shareholders of Prologis Inc (PLD) looking to boost their income beyond the stock's 3.4% annualized dividend yield can sell the January 2026 covered call at the $140 strike and collect the premium based on the $7.10 bid, which annualizes to an additional 4.1% 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 $140 would be lost if the stock rises there and is called away, but PLD shares would have to advance 23.8% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 30.1% return from this trading level, in addition to any dividends collected before the stock was called.