Newell Brands Offers Potential for Enhanced Returns with Covered Calls

Shareholders of Newell Brands Inc (Symbol: NWL) seeking higher income beyond the stock’s 6% annualized dividend yield can consider selling a September covered call at the $5 strike price. This strategy allows investors to collect a premium based on the 60 cents bid, which translates to an additional 31.3% return when annualized. Combined with the existing dividend yield, shareholders could see a total annualized return of 37.3%, provided the stock is not called away. Should the stock price exceed $5, any gains above this level would be forfeited. However, current levels suggest that NWL shares would need to rise by 7.3% for that to happen, resulting in a 20.2% total return, in addition to any dividends received prior to the stock being called.

It’s important to note that dividends are not always predictable, as they depend on the company’s profitability. Monitoring the dividend history of Newell Brands can provide insights into whether the current yield is sustainable. The dividend history chart for NWL, illustrated below, can aid in evaluating the likelihood of continued payouts.

Additionally, the chart displaying NWL’s trailing twelve-month trading history highlights the $5 strike in red:

This chart, alongside the stock’s historical volatility, can be instrumental in determining if selling the September covered call at the $5 strike is worthwhile compared to the potential upside. Currently, the trailing twelve-month volatility for Newell Brands is calculated at 70%, based on the last 250 trading days’ closing values and today’s price of $4.70. For further call option ideas and expiration dates, see the NWL Options page on StockOptionsChannel.com.

In mid-afternoon trading on Tuesday, S&P 500 put volume reached 750,318 contracts, while call volume was at 1.25 million, resulting in a put:call ratio of 0.60 for the day. This figure indicates a higher preference for call options relative to puts, as compared to the long-term median put:call ratio of 0.65. Essentially, options traders appear to favor calls in today’s market.

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Also see:

• General Electric market cap history
• BCAT Dividend History
• Institutional Holders of DHI

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