Strategies to Leverage IIPR’s Dividend Yield and Covered Calls
Shareholders of Innovative Industrial Properties Inc (Symbol: IIPR) may seek to enhance their income by looking beyond the stock’s robust 11.4% annualized dividend yield. One option is to sell the April 2025 covered call at the $70 strike price, enabling investors to collect a premium of $4.10. This strategy could lead to an impressive additional return of 21.1% when annualized based on the current stock price. In total, if the stock is not called away, shareholders could see an annualized return of 32.5%. However, if the stock does rise above $70, those gains will be forfeited. Notably, IIPR shares would need to appreciate by 5.4% from current levels for the stock to be called, resulting in an overall return of 11.6% including the dividends earned prior to the call.
Dividend payouts can fluctuate and are closely tied to the company’s profitability. To assess the likelihood of IIPR maintaining its current dividend, investors can review the dividend history chart provided below.
Additionally, the following chart illustrates IIPR’s trailing twelve-month trading history, with the $70 strike highlighted in red:
This chart, combined with an understanding of the stock’s historical volatility, aids investors in determining whether selling the April 2025 covered call is a sound decision. Innovative Industrial Properties Inc’s trailing twelve-month volatility is calculated to be 39%, based on the last 251 trading day closing values and the current price of $66.51. For other options strategies with various expiry dates, visit the IIPR Stock Options page on StockOptionsChannel.com.
As of mid-afternoon trading on Tuesday, the put volume for S&P 500 components reached 479,532 contracts, while call volume hit 1.08M, resulting in a put:call ratio of 0.45 for the day. This reflects a high demand for call options compared to puts, as the long-term median put:call ratio stands at 0.65. Clearly, buyers are leaning toward calls in today’s options trading.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
