Strategy To YieldBoost Hooker Furnishings Corp From 4.5% To 53.4% Using Options
April 10, 2024 at 12:55 PM EDT
Shareholders of Hooker Furnishings Corp (HOFT) looking to boost their income beyond the stock's 4.5% annualized dividend yield can sell the April covered call at the $25 strike and collect the premium based on the 25 cents bid, which annualizes to an additional 48.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 53.4% annualized rate in the scenario where the stock is not called away. Any upside above $25 would be lost if the stock rises there and is called away, but HOFT shares would have to advance 20.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 21.8% return from this trading level, in addition to any dividends collected before the stock was called.