Winnebago Investors Eye Covered Calls for Enhanced Returns

A recent report outlines strategies for Winnebago Industries shareholders to increase their income beyond the 2.9% dividend yield. Selling a covered call could yield an additional 18.3% return, reaching a total of 21.2% annualized, highlighting potential risks and rewards for investors.

Date: 27-12-2024

AI Rating: 7

The report provides insights on Winnebago Industries, Inc. (WGO) and its potential for increased shareholder returns through covered call options. The current stock price is $46.57, with a 2.9% annualized dividend yield that shareholders are looking to boost.

By selling a June 2025 covered call at the $50 strike price, investors can collect a premium of $4.10, equating to an 18.3% additional rate of return against the original stock price. If the stock price exceeds $50, WGO holders would miss out on further upside past this point. However, if shares reach $50, investors would still experience a return of 15.7% along with dividends when the stock is called away.

The report emphasizes that dividend amounts are contingent on the company’s profitability, which can fluctuate. It also highlights the past performance of WGO’s dividends, indicating an expectation for the continuation of the 2.9% yield. Investors are encouraged to analyze the historical trading history and volatility, marked at 36%, to make informed decisions about the associated risks of selling calls against potential returns.

Additional options market data suggests a bullish sentiment among traders, with a put-call ratio of 0.58 implying stronger interest in call options relative to puts, relative to a long-term median of 0.65.

This combination of dividend yield, options trading, and profitability considerations suggests a potential path for investors seeking to enhance their returns while weighing the trade-offs of covered call selling.

Stocks: WGO