How To YieldBoost SB From 1.1% To 6.8% Using Options

Shareholders of Safe Bulkers Inc (SB) looking to boost their income beyond the stock's 1.1% annualized dividend yield can sell the January 2016 covered call at the $5 strike and collect the premium based on the 10 cents bid, which annualizes to an additional 5.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6.8% annualized rate in the scenario where the stock is not called away. Any upside above $5 would be lost if the stock rises there and is called away, but SB shares would have to advance 32.3% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 34.9% return from this trading level, in addition to any dividends collected before the stock was called.