Strategy To YieldBoost Aaron's Co From 1.6% To 15.1% Using Options
November 23, 2021 at 14:23 PM EST
Shareholders of Aaron's Co Inc (AAN) looking to boost their income beyond the stock's 1.6% annualized dividend yield can sell the March 2022 covered call at the $30 strike and collect the premium based on the $1.10 bid, which annualizes to an additional 13.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15.1% annualized rate in the scenario where the stock is not called away. Any upside above $30 would be lost if the stock rises there and is called away, but AAN shares would have to climb 16.1% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 20.3% return from this trading level, in addition to any dividends collected before the stock was called.