By: Dividend Channel
June 17, 2013 at 11:46 AM EDT
YieldBoost Assured Guaranty Ltd From 1.8% To 6.5%
Shareholders of Assured Guaranty Ltd (AGO) looking to boost their income beyond the stock's 1.8% annualized dividend yield can sell the January 2015 covered call at the $30 strike and collect the premium based on the $1.68 bid, which annualizes to an additional 4.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6.5% 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 AGO shares would have to climb 33.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 41% return from this trading level, in addition to any dividends collected before the stock was called.
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