How To Boost The Yield On Coca-Cola Stock Using Options

Core Insights - Coca-Cola (KO) is recognized as a resilient, dividend-paying consumer staples company with a strong global presence and brand loyalty, making it a favored long-term investment for notable investors like Warren Buffett [1] - The company has consistently increased its dividend for over 60 years, showcasing its financial discipline and stable cash flow even during economic downturns [1] Dividend and Investment Strategy - Income investors may enhance the attractive 3% dividend yield of Coca-Cola by employing a covered call strategy [2][3] - A covered call involves purchasing 100 shares of Coca-Cola and selling a call option against those shares, which generates premium income while limiting upside potential [4] Long-term Covered Call Strategy - A long-term call option for Coca-Cola with a strike price of 72.50, expiring on September 18, 2026, was priced at approximately $3.25, yielding $325 in premium per contract [6] - The net cost of acquiring 100 shares is reduced by the option premium, resulting in a yield of approximately 5% over 325 days, or 5.6% annualized, excluding dividends [6] Potential Returns - If Coca-Cola's stock price exceeds 72.50 at expiration, the shares will be called away, resulting in an 11% return, equating to 12.6% annualized, not including dividends [7] - If the stock closes below 72.50, investors can continue to generate income by selling additional call options [8] Stock Ratings - Investor's Business Daily assigns Coca-Cola a Composite Rating of 72 out of 99, with an Earnings Per Share Rating of 71 and a Relative Strength Rating of 48, ranking it No. 13 in its group [9]