Coca-Cola Co cold cola by – Fotoatelie via iStock. As markets become more volatile, investors may be more interested in generating income rather than capital gains. Coca-Cola (KO) stock, a longtime Warren Buffett holding, has long been a staple for dividend investors. With the stock down 8% in the last month, it provides an attractive opportunity for savvy investors. We can more than double the yield on our KO shares by using a covered call strategy. A covered call involves selling call options against a stock position. For example, buying 100 shares of KO would cost $6,592. The September 19, 2025 call option with a strike price of $70 was trading around $2.80 yesterday, generating $280 in premium per contract for covered call sellers. Selling the call option generates an income of 4.
Investors can significantly increase their Coca-Cola dividends by employing a covered call options strategy. By doing so, they can achieve an annualized yield of approximately 5.00% in just 324 days, which equates to a 44 return.
In addition to this impressive return, covered call traders also earn Coca-Cola’s annual dividend of $1.92, yielding 2.92%. The covered call option premium further enhances the total yield, raising it from 2.92% to 7.92%. This represents a highly attractive yield for a low-beta, defensive stock, and it is nearly triple what regular shareholders receive, assuming the stock price remains stable.
However, the potential for profit increases if the stock price rises above the strike price of $70. Should KO close above $70 on the expiration date, the shares will be called away at $70, resulting in a total profit of $688 for the trader (gain on the shares plus the $280 option premium received). This results in a 10.9% return, or 12.28% on an annualized basis.
It’s important to note, though, that there are risks involved with this trade. If the stock price of KO drops, it could eliminate any gains made from selling the call.
KO Company Details: The Coca-Cola Company holds strong brand equity. Its marketing, research, and innovation enable it to obtain a major market share in the non-alcoholic beverage industry. The company’s portfolio encompasses beverage products ranging from sodas to energy drinks. Apart from sparkling soft drinks, it sells a wide variety of still beverages including water, enhanced water, juices and juice drinks, sports drinks, ready-to-drink teas, coffees, dairy, and energy drinks. The company is investing in healthier alternatives such as coffee, sparkling water, and sports drinks. The rollout of Coca-Cola Energy, Coca-Cola Plus Coffee, Powerade Ultra, and Powerade Power Water are additions in these lines. Most of the company’s beverages are manufactured, sold, and distributed by independent bottling partners.
Coca-Cola currently reports operating results under segments like Europe, Middle East and Africa; Latin America; North America; Asia Pacific; Global Ventures; Bottling Investments and Corporate. The Barchart Technical Opinion rating is a 24% Buy with a Weakest short term outlook for maintaining the current direction. Implied volatility is at 17.39%, compared to a 12-month low of 10.82% and a 12-month high of 20.76%. Coca-Cola is rated as a Strong Buy by 15 analysts, along with 1 Moderate Buy and 5 Hold ratings. Defensive stocks such as Coca-Cola are a common component of most investment portfolios. Now, you know how to generate extra income from your KO position. Please remember that options are risky and investors can lose 100% of their investment. This article is for education purposes only and not a trade recommendation.
Investors seeking to optimize their returns from Coca-Cola can consider employing an options strategy to potentially double their dividend income.
It’s crucial to conduct thorough research and consult with a financial advisor before making any investment decisions. This ensures that your investment strategy aligns with your financial goals and risk tolerance.
Always remember to perform your own due diligence and seek professional advice when navigating the complex world of investments.
