YieldBoost Provident Financial Services To 19.6% Using Options
August 17, 2021 at 12:09 PM EDT
Shareholders of Provident Financial Services Inc (PFS) looking to boost their income beyond the stock's 4.2% annualized dividend yield can sell the January 2022 covered call at the $22.50 strike and collect the premium based on the $1.45 bid, which annualizes to an additional 15.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 19.6% annualized rate in the scenario where the stock is not called away. Any upside above $22.50 would be lost if the stock rises there and is called away, but PFS shares would have to advance 2.9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 9.6% return from this trading level, in addition to any dividends collected before the stock was called.
