IWM Dividend Type Payments

iShares RUSSELL 2000 INDEX dividend

Although IWM has no upcoming (meaning, Board-approved and announced) dividends, you can sell covered calls on iShares RUSSELL 2000 INDEX to create 12 extra dividend type payments per year to boost its yield. Let's look at some recent prices (last updated Thu 4:16 PM ET):

iShares RUSSELL 2000 INDEX (IWM)
Bid Ask Last Change Volume P/E Market Cap
171.42 171.45 171.22 +1.57 16.4M - 468B

IWM Dividend-Like Income Using Covered Calls

With IWM at 171.22, here's a table showing how big the annual "dividend" (ie. total annual call premium received) would need to be to attain 3%, 5%, and 10% annual yields. Also shown is the equivalent number of cents/day necessary to achieve each yield:

Annual Yield Annual Premium Cents/Day
3% 5.14 1.4
5% 8.56 2.3
10% 17.12 4.7

So now we need to find out of the money covered calls that pay at least the prescribed cents/day amount of time premium. That will generate income and, because they are out of the money, leave room for some upside potential on the stock. Here are some examples:

3% Yield On IWM Using Covered Calls
Expiration Strike Call Bid Days Cents/Day Upside Potential
Sep 28 174.00 0.15 9 1.7 2.55 (1.5%)
Oct 5 174.50 0.27 16 1.7 3.05 (1.8%)
5% Yield On IWM Using Covered Calls
Expiration Strike Call Bid Days Cents/Day Upside Potential
Sep 28 173.00 0.34 9 3.8 1.55 (0.9%)
Oct 5 173.50 0.49 16 3.1 2.05 (1.2%)
10% Yield On IWM Using Covered Calls
Expiration Strike Call Bid Days Cents/Day Upside Potential
Sep 28 172.00 0.69 9 7.7 0.55 (0.3%)
Oct 5 172.50 0.82 16 5.1 1.05 (0.6%)

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