Celestica Stock Doesn't Pay A Dividend, But Here's How To Create Yield
Celestica (CLS) is one of the largest electronics manufacturing services companies in the world, serving the computer and communications sectors. Celestica stock is sitting above the 21-day exponential moving average, as well as the 50- and 200-day moving averages. Shares are breaking out to a new high.
We looked at a bull put spread trade on this stock market leader early in June, and that trade has worked very well. Another way to play the stock could be via a long-term covered call strategy.
↑X NOW PLAYINGWhat Is A Bull Put Spread?Investors who believe Celestica stock might trade sideways for a few months could look at selling covered calls on their underlying stock position to increase their income.
Celestica doesn't pay a dividend. But with a covered call strategy, we can effectively create our own "dividend" via option premium.
Long-Term Covered Call On Celestica Stock
A covered call involves buying 100 shares of the underlying stock and simultaneously selling a call option against those shares.
Selling the call limits the upside but increases the yield from the investment in the form of an option premium.
The investor keeps the premium generated from selling calls no matter what happens with the stock.
Celestica Stock Checkup
According to IBD Stock Checkup, CLS stock is ranked number 1 in its group and has a Composite Rating of 99, an Earnings Per Share Rating of 99, and a Relative Strength Rating of 98.
When trading covered calls, most investors sell monthly calls against their stock to make the most of the effects of time decay. That makes a lot of sense, but also requires a lot of active management. What if we sold longer-term covered calls against Celestica stock? Let's take a look.
On Celestica stock, a June 18, 2026-expiration call option with a strike price of 200 sold recently for around $27.50, generating $2,750 in premium per contract.
Purchasing 100 shares of Celestica stock will cost around $15,925, based on recent trading. However, the net cost can be reduced by the $2,750 option premium received.
Creating Yield
Therefore, we have created a yield of (2,750/13,175) in 348 days, which is 20.87% or 21.89% annualized.
That clearly beats the dividend yield on most stocks in the current market and still allows for around $4,075 of capital appreciation.
If CLS closes above 200 on the expiration date, the shares will be called away at 200, leaving the trader with a 51.80% return, which is 54.33% on an annualized basis.
Covered calls are a fantastic way to generate income from a stock holding while also providing some downside protection.
If Celestica stock closes below 200 on the expiration date, the investor can sell another call if they want to continue generating option premium.
Investors would need to weigh the pros and cons of the stock before initiating a bullish trade, such as a covered call.
Please remember that options are risky, and investors can lose 100% of their investment.
This article is for educational purposes only and not a trade recommendation. Remember always to do your due diligence and consult your financial adviser before making any investment decisions.
Gavin McMaster has a masters in applied finance and investment. He specializes in income trading using options and is conservative in his style. He also believes patience in waiting for the best setups is the key to successful trading. Follow him on X/Twitter at @OptiontradinIQ.
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