YUM

YieldBoost Yum! Brands To 9.2% Using Options

Shareholders of Yum! Brands Inc (Symbol: YUM) looking to boost their income beyond the stock's 2% annualized dividend yield can sell the June 2026 covered call at the $150 strike and collect the premium based on the $9.30 bid, which annualizes to an additional 7.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.2% annualized rate in the scenario where the stock is not called away. Any upside above $150 would be lost if the stock rises there and is called away, but YUM shares would have to advance 3.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 10% return from this trading level, in addition to any dividends collected before the stock was called.

In general, dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company. In the case of Yum! Brands Inc, looking at the dividend history chart for YUM below can help in judging whether the most recent dividend is likely to continue, and in turn whether it is a reasonable expectation to expect a 2% annualized dividend yield.

YUM+Dividend+History+Chart

Below is a chart showing YUM's trailing twelve month trading history, with the $150 strike highlighted in red:

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The chart above, and the stock's historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the June 2026 covered call at the $150 strike gives good reward for the risk of having given away the upside beyond $150. (Do most options expire worthless? This and six other common options myths debunked). We calculate the trailing twelve month volatility for Yum! Brands Inc (considering the last 249 trading day closing values as well as today's price of $144.85) to be 22%. For other call options contract ideas at the various different available expirations, visit the YUM Stock Options page of StockOptionsChannel.com.

In mid-afternoon trading on Monday, the put volume among S&P 500 components was 740,222 contracts, with call volume at 1.52M, for a put:call ratio of 0.49 so far for the day. Compared to the long-term median put:call ratio of .65, that represents very high call volume relative to puts; in other words, buyers are preferring calls in options trading so far today. Find out which 15 call and put options traders are talking about today.

Top YieldBoost Calls of the S&P 500 »

Also see:
• EQFN Average Annual Return
• Top Ten Hedge Funds Holding JETS
• IJH market cap history

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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