Maximizing Income: Covered Call Strategy for Domino’s Pizza Shareholders

Shareholders of Domino’s Pizza Inc. (Symbol: DPZ) seeking to enhance their income beyond the stock’s 1.6% annual dividend yield can consider a strategic move. By selling the January 2027 covered call option at the $500 strike price, investors can collect a premium based on the $47.40 bid. This translates to an additional 6% return, which, when added to the current dividend yield, offers a total annualized rate of 7.6%—assuming the stock is not called away. However, if the stock price exceeds $500, shareholders will miss out on any gains above this threshold. Currently, DPZ shares would need to increase by 16.6% to hit that mark. In a scenario where the stock is called, shareholders could achieve a 27.7% return, in addition to any received dividends prior to the call.

Dividend payouts are often variable and fluctuate based on company profitability. Thus, reviewing Domino’s Pizza Inc.’s dividend history can provide insight into whether the current 1.6% yield is sustainable. Below is a chart detailing Domino’s recent dividend trends:

The following chart illustrates DPZ’s trailing twelve-month trading history, highlighting the $500 strike in red:

This chart, in conjunction with DPZ’s historical volatility, can help investors assess whether selling the January 2027 covered call at the $500 strike offers an adequate return for relinquishing potential upside beyond that price. Currently, we calculate the trailing twelve-month volatility for Domino’s Pizza Inc. (using the last 250 trading day closing prices along with today’s price of $428.26) to be 30%. For additional call option strategies across various expiration dates, visit the DPZ Stock Options page on StockOptionsChannel.com.

On a different note, during mid-afternoon trading on Wednesday, the S&P 500 saw a put volume of 1.16 million contracts against a call volume of 2.09 million contracts, resulting in a put:call ratio of 0.56 for the day. This ratio, lower than the long-term median of 0.65, indicates a higher preference for call options among traders.

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