Strategy To YieldBoost NVT From 1.1% To 12.2% Using Options
September 27, 2024 at 11:36 AM EDT
Shareholders of nVent Electric PLC (NVT) looking to boost their income beyond the stock's 1.1% annualized dividend yield can sell the February 2025 covered call at the $80 strike and collect the premium based on the $3.20 bid, which annualizes to an additional 11.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 12.2% annualized rate in the scenario where the stock is not called away. Any upside above $80 would be lost if the stock rises there and is called away, but NVT shares would have to advance 11.7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 16.1% return from this trading level, in addition to any dividends collected before the stock was called.