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September 01, 2020 1:20pm
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YieldBoost Resources Connection From 6.8% To 16.3% Using Options

Shareholders of Resources Connection Inc (RGP) looking to boost their income beyond the stock's 6.8% annualized dividend yield can sell the February 2025 covered call at the $10 strike and collect the premium based on the 20 cents bid, which annualizes to an additional 9.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 16.3% annualized rate in the scenario where the stock is not called away. Any upside above $10 would be lost if the stock rises there and is called away, but RGP shares would have to advance 20.9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 23.3% return from this trading level, in addition to any dividends collected before the stock was called.
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