How To YieldBoost CHCT From 10% To 29.6% Using Options
November 18, 2024 at 11:39 AM EST
Shareholders of Community Healthcare Trust Inc (CHCT) looking to boost their income beyond the stock's 10% annualized dividend yield can sell the January 2025 covered call at the $20 strike and collect the premium based on the 60 cents bid, which annualizes to an additional 19.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 29.6% annualized rate in the scenario where the stock is not called away. Any upside above $20 would be lost if the stock rises there and is called away, but CHCT shares would have to advance 7.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 10.8% return from this trading level, in addition to any dividends collected before the stock was called.