Investors considering a purchase of IDEX Corporation (IEX) stock, but cautious about paying the going market price of $219.16/share, might benefit from considering selling puts among the alternative strategies at their disposal. One interesting put contract in particular, is the April 2022 put at the $210 strike, which has a bid at the time of this writing of $10.50. Collecting that bid as the premium represents a 5% return against the $210 commitment, or a 7.7% annualized rate of return (at Stock Options Channel we call this the YieldBoost).

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Selling a put does not give an investor access to IEX's upside potential the way owning shares would, because the put seller only ends up owning shares in the scenario where the contract is exercised. And the person on the other side of the contract would only benefit from exercising at the $210 strike if doing so produced a better outcome than selling at the going market price. (Do options carry counterparty risk? This and six other common options myths debunked). So unless IDEX Corporation sees its shares decline 4.5% and the contract is exercised (resulting in a cost basis of $199.50 per share before broker commissions, subtracting the $10.50 from $210), the only upside to the put seller is from collecting that premium for the 7.7% annualized rate of return.

Interestingly, that annualized 7.7% figure actually exceeds the 1% annualized dividend paid by IDEX Corporation by 6.7%, based on the current share price of $219.16. And yet, if an investor was to buy the stock at the going market price in order to collect the dividend, there is greater downside because the stock would have to lose 4.45% to reach the $210 strike price.

Always important when discussing dividends is the fact that, in general, dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company. In the case of IDEX Corporation, looking at the dividend history chart for IEX below can help in judging whether the most recent dividend is likely to continue, and in turn whether it is a reasonable expectation to expect a 1% annualized dividend yield.

Below is a chart showing the trailing twelve month trading history for IDEX Corporation, and highlighting in green where the $210 strike is located relative to that history: