Strategy To YieldBoost Franklin Resources To 9.6% Using Options
September 18, 2024 at 11:38 AM EDT
Shareholders of Franklin Resources Inc (BEN) looking to boost their income beyond the stock's 6.1% annualized dividend yield can sell the January 2026 covered call at the $25 strike and collect the premium based on the 95 cents bid, which annualizes to an additional 3.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.6% 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 BEN shares would have to advance 22.9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 27.6% return from this trading level, in addition to any dividends collected before the stock was called.