Exploring Income Opportunities with ABM Industries’ Covered Call Strategy

Shareholders of ABM Industries, Inc. (Symbol: ABM) seeking to enhance their income beyond the stock’s 2.1% annualized dividend yield can consider selling a March covered call at the $55 strike. By doing so, they can collect a premium based on the 70 cents bid, which translates to an annualized return of 50.4% relative to the current stock price. This results in a total potential annualized return of 52.5%, assuming the stock is not called away. However, should the stock rise above $55, any upside appreciation would be forfeited. It is worth noting that ABM shares would need to increase by 8.6% from current levels for such a scenario to occur. In this instance, if the stock is called away, shareholders would still achieve a 10% total return from their current trading level, plus any dividends received prior to the call.

Dividend amounts can fluctuate, reflecting the profitability patterns of individual companies. Therefore, examining ABM Industries, Inc.’s historical dividend history is essential to assess the sustainability of its recent dividend payments and determine whether a 2.1% annualized yield is viable.

Additionally, the chart below illustrates ABM’s trailing twelve-month trading history, with the $55 strike highlighted in red:

The combination of the chart above and the stock’s historical volatility offers valuable insights into the risk-reward profile associated with selling a covered call at the $55 strike. Potential investors can weigh this strategy against the likelihood of the options expiring worthless. The trailing twelve-month volatility for ABM Industries, Inc. is calculated at 26%, factoring in the last 250 closing values along with today’s price of $50.88. For additional call option contract options and expirations, refer to the ABM stock options page on StockOptionsChannel.com.

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Also see:

• Dividend Yield
• Funds Holding WCHN
• ETFs Holding MNK

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