Boise Cascade Co. Offers 11.6% YieldBoost with Covered Call

Boise Cascade Co. shareholders can enhance their income by utilizing a covered call strategy, which presents an enticing 11.6% annualized return. This report analyzes the company's dividend yield and trading options that may affect future stock performance.

Date: 20-11-2024

AI Rating: 7

The report discusses the potential for Boise Cascade Co. (BCC) shareholders to increase their income through a covered call strategy. By selling a July 2025 covered call at a $155 strike price for a premium of $10.00, shareholders can seek an annualized return boost of 11% on top of the stock's current 0.6% annualized dividend yield, resulting in a total of 11.6%. This indicates a proactive approach to income generation for investors.

However, if BCC's stock price exceeds $155, shareholders would lose the potential upside beyond this point, though they would still have achieved a 19.7% return overall if the stock is called away. The highlighted return showcases the importance of having a well-structured strategy in place for income generation amid fluctuating stock prices.

The report emphasizes that, historically, dividend amounts vary with company profitability, highlighting the potential challenges of relying solely on dividends. Investors are encouraged to examine the dividend history of BCC to assess the likelihood of maintaining the 0.6% yield moving forward.

Also mentioned is the stock's trailing twelve-month volatility of 38%, which suggests a significant fluctuation in price, shedding light on the potential risks associated with this investment strategy. Moreover, current options trading activity reveals a bullish sentiment among traders with a put:call ratio of 0.59, indicating a preference for calls over puts.

In summary, Boise Cascade Co.'s covered call offering presents an interesting opportunity for maximizing returns, especially for those looking to increase income beyond dividend yields. However, prospective investors should weigh the risk of losing upside potential against the desired income generation strategy.

Stocks: BCC