American Tower Corp Offers Attractive Covered Call Options

Investors in American Tower Corp can enhance income via covered calls, offering a potential 14% annualized return. This strategy, along with the steady dividend yield, positions AMT shares favorably for future profitability.

Date: 09-09-2024

AI Rating: 7

American Tower Corp (Symbol: AMT) presents a compelling opportunity for shareholders seeking income beyond its 2.7% annualized dividend yield. By selling a covered call at the $240 strike with a premium of $20.70, investors can effectively earn a total potential return of 14% annualized if the stock is not called away. Any further gains above the $240 strike would be forfeited, but in the event that the stock rises, a 10.2% return would still be achieved from the current trading level, plus any dividends received prior to this event.

However, it is critical to consider the unpredictability of dividend amounts tied to profitability. AMT shareholders can look at the company's dividend history to gauge the likelihood of maintaining the 2.7% yield moving forward. This is vital, as consistent dividends form an essential part of the total return on investment.

Moreover, the analysis indicates AMT's historical volatility at 26%, suggesting that the option trading could yield meaningful results despite the risk associated with giving away upside. Investors may use tools such as historical trading data and volatility metrics to evaluate whether selling the June 2025 covered call is justifiable based on potential gains compared to risks.

Finally, the current options market shows a strong preference for call options, with a put-to-call ratio of 0.58 compared to a long-term median of 0.65. This higher call volume indicates market sentiment is leaning bullish, reflecting investor confidence in AMT's performance.

Stocks: AMT