“Safe 21% Income Fund Goes Ex-Dividend: Buy Now”

This ad is from Bryan Perry’s 25% Cash Machine, which I haven’t written about very often — it’s an income-focused letter, but a bit more aggressive than some of them (thus, the 25% Cash Machine title, which clearly stokes heartier fires than, for example, Tom Dyson’s 12% Letter, though their aims are often similar).

But lots of folks have been asking about his latest round of ads, so I thought I should give it a look again. Here’s what he promises:

“Bryan Perry here, and this must be one of the biggest and safest paydays I’ve seen in years.

“One of the country’s highest-rated and little-known income funds is about to go ex-dividend. The fund pays out 21% annually and has a long-term track record for continuous payments.

“You must add this one to your holdings now.”

Nothing wishy-washy there, eh? What else do we learn about this “income fund?”

“Without getting too technical, the fund is able to deliver a 21% annual yield by following a proprietary dividend-capture methodology that:

“Maximizes the amount of distributed income.

“Identifies potential dividend increases and capital gains light-years ahead of the market.

“Surprisingly, it’s able to do this not by owning the market’s riskiest stocks, but by owning the market’s safest ones—financially solid companies whose incomes and cash flows are rising.”

OK, so I think I know who he’s talking about … but let’s get a few specific clues, just to be sure:

“it’s no surprise that the fund is up 60% since March 9.…

“80% of the companies held in the fund have recently raised their dividends,

“40% of the companies that it is invested in have a single-digit P/E,

“The fund is diversified in 125 companies and 20 countries, and

“The fund shifted from quarterly to monthly payments.”

So … who is this mysterious little income fund? Well, you could always subscribe to the 25% Cash Machine if you want the official answer, but I can tell you — free, naturally — that it almost has to be …

Alpine Total Dynamic Dividend Fund (AOD)

This is a closed-end fund, and it does have a high monthly dividend, with a strategy that relies on dividend capture and rotation of holdings to increase dividend exposure (the short and incomplete explanation of that? They hold a stock until it goes ex dividend, then sell it and move to another stock about to go ex-div, then go back to the original stock for the next quarter … exhausting, really.)

Perry has loved the Alpine funds for years — I wrote about his teasers for these closed-end and mutual funds and their dividend capture strategy (he called them “Dividend Doubling Dynamos” back then) in December of 2007, you can see that article for a bit more detail on the strategy they use, if you like, I won’t go into too much depth here — and Alpine also explains that this isn’t just a dividend capture strategy (they also go after special dividends, dividend growers, and undervalued yield stocks), but they explain that “capture” part of it on their website here.

And yes, the other numbers match up nicely, so I’m quite certain this is his pick right now as it has been many times before during this fund’s relatively short life — it pays monthly, but declares the dividend quarterly and recently declared that the next three dividends will all be the same amount as in the prior quarter, which is probably heartening to investors. If you’re interested in this kind of management strategy, Alpine also offers several other funds — they’ve got three closed end funds (in addition to this general fund there’s a real estate and, nominally, a “global” version), and a slew of regular mutual funds that they manage.

Since this is a closed-end income-focused fund, it’s important to pay attention to not just the distribution rate, but the premium/discount to the net asset value. Closed end funds can trade at any price on the open market, unlike mutual funds they do not have to hew closely to their net asset value, (the value, calculated daily, of their current portfolio divided by the number of shares). In AOD’s case there have been wild, strong swings from discount to premium and back again … and right now, the shares trade at an uncharacteristically high premium to their net asset value. As of the close on Friday the fund had a NAV of $6.39, and as I type this it’s trading at $7.25, so that’s a premium of 13.5% over the real value of the shares.

People are willing to pay that premium because they like the AOD strategy and the high income (the shares are up slightly, so the indicated yield is now down to about 19%), but do keep in mind that this fund can see exaggerated moves based on sentiment changes — when the world was falling apart last Fall, the fund traded at a discount of better than 10%, then when optimism returned, albeit briefly, they got to a 15% premium in January, then back to a discount during the February and March low period. So holding these shares can give you a bit of heartburn, though so far they have been able to keep the dividend steady, and certainly there’s something to be said for a 19% dividend, perhaps even if you have to pay steep management fees and risk a high fund premium to get it.

Then again, if this Summer shows us the stock doldrums that many folks are expecting, maybe you’ll get a chance to get interested in this fund when it’s trading at a discount to its assets — certainly, past wide swings in both directions indicate that there’s a good chance for a better deal in the future (and we’re right in the middle of this runup to a big premium — just a few weeks ago the shares traded at a much smaller 5% premium).

Closed end funds can be a bit manic-depressive, gaining huge premiums when folks are excited about them and about the market, and sinking to steep discounts when investors freak out about bad news or are depressed about market prospects … and of those two extremes, I think it’s safe to say that it’s better to buy when others want to sell — that is, if you’ve researched the fund, you’re sold on the strategy, and you think management’s going to perform well.

So … on the plus side, they seem to be able to keep churning out the income using their dividend growth strategy and their holdings rotation across a very diversified portfolio to maximize dividends, even with many “blue chip” companies cutting payouts, and the fund is not currently leveraged to any significant degree (like many closed-end funds, they are allowed to borrow up to 33% to boost returns — but, also like many funds, the supply of leverage dried up last Fall, and investors started wanting more conservative positioning, so they are down to a very low percentage, in the single digits, as of the last report I saw).

On the negative side, there is an expense ratio of well over 1% — not crazy high, but certainly much higher than many mutual funds, the shares trade at a steep premium right now over their asset value but often swing to a discount based on investor sentiment or performance, and they trade a lot (turnover is over 400%, thanks probably to the rotation strategy), which I’ll guess might have an impact on tax implications for shareholders, though I haven’t looked into that … and if the credit markets eventually return to the point that it’s reasonable for closed-end funds to “lever up” again, Alpine could conceivably get a boost from that (or get clobbered, since leverage amplifies returns both up and down).

Oh, and to go along with all that dividend income, you’ve got capital losses — the net asset value has averaged a loss of almost 20% a year since inception, which is not necessarily dramatically worse than an index fund for this time period, but is nonetheless a significant counterpoint to that big dividend income.

So … are you looking for a closed end fund with a nice, hearty dividend? Lots of newsletters were touting the steep-discount funds last Fall as a saver way to get into the market and get decent income during the crash, but you’ll see far fewer of them touting closed end funds that trade at a premium — then again, this has been a Perry favorite almost since the fund was launched (about 2-1/2 years ago), so we can certainly admire his consistency. If you’ve got an opinion on Alpine’s funds, or on the “dividend capture” strategy … or about competitors who might do it better, please let us know with a comment below.

And if you’ve ever subscribed to the 25% Cash Machine, your fellow investors want to know what you think — share your opinion in a quick-and-easy review by clicking here — or check out the other reviews of income-focused newsletters here to see if you’ve anything to learn … or add. Thanks1

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69 Comments on "“Safe 21% Income Fund Goes Ex-Dividend: Buy Now”"

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spreadtrader
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spreadtrader
May 26, 2009 11:07 am
You know, when I first read this teaser I couldn’t believe it could be AOD because the facts didn’t quite fit. So I spent a fair amount of time trying to find the “answer”, obviously being very interested in such a plum investment. But this was pointed out here in early December in our very own forum (see post #4): http://oneguysinvestments.com/gumshoe/comments.php?DiscussionID=1619 I bought it in several installments through February with an overall average price of 5.65 and my yield is still over 25% even after they cut the dividend. Needless to say, I’m a very happy alpine camper (that’s strange,… Read more »
SageNot
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SageNot
May 26, 2009 11:10 am

http://finance.yahoo.com/q/ta?s=AOD&t=1y&l=on&z=m&q=l&p=m200,m50,p&a=m26-12-9,r14,ss&c=

On first blush I’d say, what’s not to like? On 2nd blush that dawg-gone premium over 13% is too high by normal standards.

So my “seat-of-the-pants” strategy is to look more at the fundamentals here, & I must say this paragraph, if true, is the deal maker.

“Surprisingly, it’s able to do this not by owning the market’s riskiest stocks, but by owning the market’s safest ones—financially solid companies whose incomes and cash flows are rising.”

Gotta like that analogy if quality of issues is your bag.

Good one Travis!

shawn
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shawn
May 26, 2009 11:42 am
AOD Looks nice. But, noon has talked about the tax situation. In general to get the favored tax treatment an individual needs to hold his stocks for thirty days before and/or (I don’t know which) after the ex date. Does this pass through and hence the dividends may not be qualified? If you want 25% yield, try SFI preferreds. They are currently trading at about 8 and pay 2 bucks a year. They have recently come off of lows last fall of 2.50. You don’t get the qualified tax rate but you can hope to make a nice capital gain… Read more »
fabian
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fabian
May 26, 2009 12:14 pm

I bought the open end fund ADVDX and it’s stays more or less near the lows, that’s not good. However, during the turmoil (I’m down 55% on that one) it always paid dividends.

Gene
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Gene
May 26, 2009 12:26 pm

Thanks for the job you do on these letters, certainly helps me to know the market better. This sounds like a winner, for sure when they drop back off premium as you suggest. In the past I have seen teasers suggesting that some California folks were making big returns by buying stocks with big dividends just before payout time and reaping the dividends and then rotating out just as this fund is. This fund is doing the work for you on the stocks.

Tom
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Tom
May 26, 2009 1:05 pm

I’m not sure I get how this works. If a $10 stock pays a $1 dividend, the price usually drops to $9 when it goes ex-dividend. Generally, a decent stock will come back up in price before the next dividend announcement, but if they buy it for $10, capture the $1 dividend and then sell it for $9 and move on, where’s the profit? What am I missing?

spreadtrader
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spreadtrader
May 26, 2009 1:33 pm

Here’s a recent article panning CEF’s as dividend plays. It specifically mentions AOD. I’m not sure I agree with the author’s conclusion. If you know how to trade, you like the fact that volatility is one component that drives the fluctuation between discount/premium. I’d much rather trade in and out of a fund that pays me nonthly as opposed to quarterly; and I’m sure you see why. But this particular fund has no real track record regarding its ability to sustain an up trend; and unfortunately you can’t purchase put options to protect the long position.

Anyway, here’s the link:
http://seekingalpha.com/article/135958-are-etfs-and-cefs-good-for-dividend-investing

Dan
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Dan
May 26, 2009 2:43 pm

This stock hit the market in January of 2007 at $20.00. It paid an annual dividend of $2.16 ($.18/month). The annual div is now $1.44. The stock is now in the low $7’s less than 2.5 years since inception.

At exactly what point in its history was this stock a good buy? As near as I can see from the charts, March of 2009 would have been a good time, but this was a good time for nearly everything.

Does anyone know when the tout began touting this stock?

EconoMarcus
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EconoMarcus
May 26, 2009 5:32 pm
At first I was intrigued by the idea of AOD. It could work I thought. Sure, right after having paid its dividend a stock falls. But a “quality” stock should recover soon after. So actuyally I still think the strategy of AOD should work. But now my point: If you compare AOD’s (admittedly so far rather short) chart to the S&P500 or the DJ World Index of which AOD’s usual holdings most probably are part of, you see that AOD has underperformed those two indices quite substantially over the “long” term. What does this mean? Although the dividend distributions of… Read more »
EconoMarcus
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EconoMarcus
May 26, 2009 5:38 pm

I’m sorry the chart didn’t work. 2nd try:

http://stockcharts.com/charts/performance/perf.html?AOD,$DJW,$SPX

Then use the slider at the bottom of the chart to zoom out and look at AOD’s whole life. –> Underperformance of about 10% so far.

EconoMarcus
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EconoMarcus
May 26, 2009 5:40 pm

Ok, the $-signs are ignored by the system. Insert them before DJW and SPX. Sorry for the hassle.

William MacDonald
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May 26, 2009 6:18 pm
I think the idea of capturing ndividends in the way discribed is a hoax__or close to it. I’ve studied about doing this and I find it is impossible. Stocks, especially ones that pay high divs. on or right after the ex-date tend to decline by about the amount of the dividend. AOD does not show investors these transactions. They just want us to take their word for it. What they are really doing in this process is converting equity to dividends so they can pay a higher rate ie 21%. Dont be fooled.
Dan
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Dan
May 26, 2009 6:43 pm

Gumshoe: I was a poster in Yahoo’s AOD chatroom. There were those who loved the stock and would be pleased to accept this dividend for decades, regardless of stock value…They never drew or even thought of the NAV graph that would intersect the X axis in two or three years.

Per your comment on returning capital in the form of income, there is no doubt. As one of us anti AOD’s stated, “the dragon is eating its tail”.

Gravity Switch
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May 26, 2009 6:46 pm

I like the turn of phrase! Thanks.

Dividends4Life
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May 26, 2009 8:50 pm

AOD’s “great” yield comes from a plummeting share price. In March they cut their dividend from $0.18/month to $0.12/month. I bought some at the end of 2007 at nearly $19 it is now trading in the $7 range. Not pretty.

Best Wishes,
D4L

Katie Catt
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Katie Catt
May 26, 2009 9:48 pm

I watched Perry for quite a while and he moves in and out of basically the same stocks and funds. If you get a copy of his book: The 25% Cash Machine, probably still available at Amazon or your library, you can get a list of those closed-end funds and stocks. If I recall correctly he explains the economic conditions that cause him to rotate in and ou of certain sectors.

G.W. Jense
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G.W. Jense
May 27, 2009 12:38 am

I got sucked into Perry’s 25% joke a couple of years ago, and it cost me about 20 grand. I don’t want to hear from or about Perry ever again!

destry
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destry
May 27, 2009 5:38 am
I think some of you might be fussing this like 2 dogs worrying a dead rabbit around on the floor. Yes AOD is ‘Down, down, down since it’s inception, virtually…Remember, the DOW peaked October 2007, and began it’s slide down to the Summer of 2008…Then it started to get nasty. So what didn’t go ,down , down down? Traders are more narrowly focused to a particular stock, rather than the overall trend….A stock can buck a trend for a variety of reasons….A trader profits from accurately guageing the stocks response…Sorry…I don’t usually try to teach my Grandmother how to suck… Read more »
Kid Shelleen51
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Kid Shelleen51
May 27, 2009 7:01 am

I’ve been considering investing in AOD myself but the recent run up scared me a bit. There’s quite a few CEF’s paying in the 17-20% range right now from companies like PIMCO, Blackrock, Nicholas & Applegate, Evergreen…etc. so the payout isn’t over the top. However, Perry says that AOD recently went from a quarterly distribution to a monthly one; in reviewing AOD’s history it looks to me like they have always paid monthly so is AOD the correct fund?

Henry Chakoian
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May 27, 2009 8:34 am

I love high dividends too. In all this discussion, no one has suggested that high payers belong in tax deffered accounts. There is an esxception.” Special” dividend payers can fit into your regular accounts. They become part of shedule D reporting. Do you have offsetting losses from the great bust? Just kidding. We all probably do. Check with your accountant. Reminder, you do not have to take disperssal from IRAs this year. I DRIP and smile. Herach.

Pam Martin
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Pam Martin
May 27, 2009 9:26 am

AOD = Alpine Total Dynamic Div Fund (CEF)
ADVDX = Alpine Dynamic Dividend Fund (OE)

Please correct article
Thanks

ic
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ic
May 28, 2009 1:24 am
AOD 12-Mo Yield as of 4/30/2009 Income Only Yield 17.06% Distribution Yield (Market) 31.10% (Current yield is much lower, about 19.81%, about half of that is a return of capital. It trades at 13% premium.) “Distribution Yield – : Total 12-month cash payments per share. Such payments may include unknown combinations of income, short- and long-term capital gains, and return of capital. http://closed-endfunds.com/FundSelector/FundDetail.fs?ID=113587 http://www.etfconnect.com/select/fundpages/global.asp?MFID=173789 AOD is unlikely to recover its original NAV unless there is an enormous run up of its remaining assets. I don’t think there are much capital gains in that payout, that means they are paying you… Read more »
ic
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ic
May 28, 2009 1:50 am

http://www.etfconnect.com/select/fundpages/other.asp?MFID=141124

Check this one out: DCA, yield 22.75%, discount 21.23%. Gained 87.64% since March low.

Unfortunately, the fund began in ’05 at $14.28 per share. March ’09 low $.89, it recovers to $1.67, expense: 3.34%.

Isn’t it ridiculous, people actually pay such morons to lose their money?

ic
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ic
May 28, 2009 2:15 am

EOD: pays 19.88% market yiled, about half from income, trades at a small discount, expense less than AOD.

Began at the same time as AOD, at the same price of $20, dropped to 7, (AOD dropped to 4), recovers to 10.

At least you don’t pay a premium to get a return of your money.

jchere
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jchere
May 28, 2009 2:49 pm

Where were you all before I bought AOD. Haven’t lost yet but now having 2nd thoughts.
Slight change of subject: I also bought IIH. 89% div! I would really appreciate any thoughts.

John Christensen
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John Christensen
May 29, 2009 12:56 am

Thank you both.

Angelo
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Angelo
May 29, 2009 3:53 am

First time i’m reading there and i have some thoughts. I have a general question for all

Do you think it could work ?

1) Select high dividend stock
2) buy the day they pay dividend, would mean get lower price at least for dividend %

3) Sell soon after dividend % recovered and price again up

You should catch the dividend without being impacted by share fluctuations

Nice site! Lot of useful info 🙂

Bob M.
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Bob M.
May 30, 2009 11:17 am

Well,at the end of the week AOD is up.However,its companion ,AGD is as well. Pulled the trigger after researching the Gumshoe’s article & bought AGD first,noted that it & AOD are similar except for share price & % of foreign & domestic stocks in each fund.I might add that I sold off FLY,which isn’t bad either,a $7 stock with a 20 cent dividend quarterly.

monthlydividendstocks
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June 24, 2009 3:43 pm

Check out my current and updated list of high yield monthly dividend paying stocks and other securities at http://www.monthly-dividend-stocks.com

raleigh1208
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raleigh1208
September 18, 2009 11:46 am

I took got suckered into Perry’s 25% Cash Machine and lost a bundle before I could get out! Beware!!

Mary Ann
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Mary Ann
September 18, 2009 12:13 pm
Years ago, I also got suckered into Perry’s Cash Machine and lost $$. Since them I’ve learned how to use ETF Connect and other sites to learn about NAV and premium and make sure that I understand what I am buying, how much its levered, and don’t buy a CEF that is not at discount to NAV. I am now very happy with the cash generated by several CEF’s that I own, such as KYE, IGN, IAF, CHI. However, I bought them all at a considerable discount to NAV. I mentally do like the concept of using the market as… Read more »
james wedel
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james wedel
September 18, 2009 11:00 pm

I too love generating my own “dividends” by selling covered calls. But I think the folks at AOD may be better equipped (and certainly have a larger pool of funds to spread their risks) so I am happy to have them in my portfolio—-other CEFs that I like are IID, HTY, BOE—-and for only the risky investors CFP which pays a 25% dividend—but it is currently trading at a huge premium to NAV.

Susan
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Susan
September 18, 2009 11:19 pm

Hi, I have been a subscriber to Bryan Perry’s Cash Machine for almost 3 months, and so far I am pleased. He explains the background for his suggestions, and then I pick and choose those I like after doing further research on them.
I could not have found the list of picks such as his on my own.

treblig
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treblig
September 19, 2009 12:38 am

I bought Chuck Perry’s book “25% Machine” and subscribed to his service. That nasty experience cost me abour 25,000 bucks. I don’t listen to him anymore.

treblig
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treblig
September 19, 2009 12:45 am

OOps! – I meant Bryan Perry. I got him confused with Chuck Hughes. My comment, though, was abour Bryan Perry.

spreadtrader
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spreadtrader
September 19, 2009 9:13 am
Like everything else you have to know how to buy low and sell high. We bought AOD in the late fall when: a) nobody was buying stock; b) the fund was at an all-time low; c) the discount was well over 10%; and d) the fund was buying back its own shares. Our yield is over 25% and we do get a fat check every month. Importantly, we would NOT be buyers of AOD now, even though it still has a double digit (15.75%) yield……because it also has a 28.5% premium. It is also at key Fibonacci resistance and may… Read more »
SageNot
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SageNot
May 26, 2009 11:19 am

http://finance.yahoo.com/q/ta?s=AOD&t=5y&l=on&z=m&q=l&p=m200,m50&a=m26-12-9,r14,ss&c=

Sorry, being away from home on a borrowed PC makes “Jack” a careless guy!

The double bottom on this 5yr. look-back is another strong bullish TA indicator. If the market doesn’t test a new bottom this year, then worrying about the premium might leave you behind the 8 ball.

I’m actually going to showcase this pick to my very conservative daughter for her IRA.

Thanks again Travis!

Gravity Switch
Admin
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May 26, 2009 11:50 am
I obviously have no idea whether or not this fund will do well, but the holdings are fairly reassuringly “blue chip” — Perry’s right that the big holdings are household names like Abbott Labs, Nintendo, Time Warner Cable, and Colgate Palmolive. It’s a big portfolio in terms of number of stocks, and it looks pretty well diversified — but of course, just holding all those stocks wouldn’t get you a yield of anywhere near 20% (or even 10%), so it’s the trading strategies and dividend capture that must supply much of the return — you’re really buying their trading strategy,… Read more »
spreadtrader
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spreadtrader
May 26, 2009 11:36 am

I’d like to add, Fibonacci says AOD is headed to 11.75 – 12.00 before the next “crash”.

SageNot
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SageNot
May 26, 2009 12:02 pm

Wowzer, Six Flags isn’t at the same quality level as these Alpine closed end funds are, as for us risk adverse folks, no thanks.

SageNot
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SageNot
May 26, 2009 12:07 pm

Hence that near 2% expense ratio I presume. In the old days (my days) nobody cared as long as those enriched dividends kept coming!

Gravity Switch
Admin
11
May 26, 2009 12:11 pm

Six Flags is actually trading OTC now, and almost worthless — SFI is iStar Financial, a commercial real estate finance co. Still surely a scary business, but most would argue it’s not quite as risky as Six Flags.

SFI actually has a half-dozen different preferreds listed, I’ve never looked at any of them and don’t know if the company is worth a look or not, but the common stock is down more than 90% over the last two years.

SageNot
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SageNot
May 26, 2009 1:17 pm
It’s no different than a quarterly dividend with the exception that it’s paid over 12 mos. instead of 4 qtrs. Since the dozens of stocks involved paid their dividends at all different times during the year, the mgrs. of the Divy Capture vehicles guide their efforts so as to normalize their payouts as much as possible. At least that was the initial take when they first became an income vehicle in the ’80’s I believe. I’m still LOL over google (Yep, I’m blaming google) having SFI & Six Flags gobbled together on one of their 1,000’s of links, & leave… Read more »
spreadtrader
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spreadtrader
May 26, 2009 1:24 pm

Gene, you can routinely check the discount/premium percentages for closed end funds at http://www.cefa.com

I agree that the fees the fund charges are well worth the higher yield; where the work that the fund managers must do to find the best trading candidates every quarter is remarkable. The only negative that I see is that this fund has been in a downtrend since inception. In fairness, that was a mere six months or so before the general market turned down in October 2007. However, that fact bears careful monitoring as well as the fluctuating discount/premium to NAV.

Gravity Switch
Admin
11
May 26, 2009 3:35 pm
Well put, Dan — it has consistently spit out the dividends, but the stock price has been down, down, down. Perry has liked it pretty much since it IPO’d, he touted it as early as April 2007 here: http://www.bloggingstocks.com/2007/04/16/alpine-total-a-dynamic-income-play/ And I wrote about his heavy teasing of the fund here, in December of 2007: http://www.stockgumshoe.com/2007/12/dividend-doubling-dynamos-3d-and-61-day.html I don’t know if any of the dividends from this fund have historically been return of capital or not, which would help to account for the loss of capital in the fund, or if they’ve just traded “capital” for “income” all along the way. Or… Read more »
SageNot
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SageNot
May 26, 2009 4:07 pm

True ’nuff guys; but has it had a reversal like the present since inception.

http://finance.yahoo.com/q/ta?s=CPN&t=1y&l=on&z=m&q=l&p=m50,m200&a=m26-12-9&c=

Remember Calpine, almost worthless & now more than a double off the bottom. http://finance.yahoo.com/q/ta?s=CPN&t=1y&l=on&z=m&q=l&p=m50,m200&a=m26-12-9&c=

They had so many lawsuites outstanding that I never thought they’d see the light of day again.

http://finance.yahoo.com/q/ta?s=CPN&t=1y&l=on&z=m&q=l&p=m50,m200&a=m26-12-9&c=

Joe Murphy
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Joe Murphy
May 26, 2009 4:10 pm

Did you mean Fibonacci the Italian hedge fund manager?

spreadtrader
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spreadtrader
May 26, 2009 4:53 pm

Not at all. Hedge fund managers are only a half step ahead of (or behind, if you’re Jim Cramer) newsletter writers. Hedge fund managers can’t trade; and they couldn’t fetch coffee for Fibonacci.

.1 hr……….n/c.

Gravity Switch
Admin
11
May 26, 2009 6:45 pm

You have a point, certainly for the very high dividend payers, and I don’t know to what extent their “performance” is attributed to their various strategies, but the dividend rotation strategy certainly could work with the more average-sized dividend companies — like Colgate, Abbott Labs, etc., so it might be that their “capture” rotation is in those companies, trying to turn 3% yields into 5-6% yields.

Still makes 20% a tough hurdle unless you’re also generating some kind of capital gains, or returning capital to shareholders.

SageNot
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SageNot
May 26, 2009 7:04 pm

http://finance.yahoo.com/q/ta?s=AOD&t=2y&l=on&z=m&q=l&p=m200&a=&c=^GSPC,^DJI

Using the 200day MA this way shows how poorly AOD did vs. both the Dow & S&P 500.

I don’t understand how that Java chart you used could possibly be correct Marcus.

EconoMarcus
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EconoMarcus
May 26, 2009 7:40 pm

Thanks for your alternative chart, SageNot. Yes, looks even worse this way.

I forgot to mention that Stockcharts adjusts its historical price data (and thus also the charts) not only for splits but also for dividends. Since AOD’s main focus is on distributing dividends rather stock price performance, i thought the comparison with Stockcharts makes more sense here. It shows the real underperformance of AOD (not just of its stock price), distributed dividends of AOD already included! (100% correct would it be if the indices were adjusted for dividends as well. But that’s a minor inaccuracy.)

EconoMarcus
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EconoMarcus
May 27, 2009 6:16 am

Of course it’s down down down like all markets in that period of time. That’s not the point. The point is that AOD is – even with a dividend adjustment! – down much more than the indices AOD picks its holdings from. That should tell us something…

spreadtrader
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spreadtrader
May 27, 2009 7:02 am

Since March 9th the Dow is up ONLY about 23%; the S&P is up ONLY about 26%……..AOD is up a WHOPPING 40%. What the heck does that tell us????????????

I think comments about AOD being an inferior investment and dividend recapture being a “hoax” are comical. If you know WHEN to buy what you buy there is no debate here. Unless they are going to confiscate my dividend payments and my capital gains as a “Madoff scheme”, I like this “hoax” just fine.

spreadtrader
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spreadtrader
May 27, 2009 7:05 am

This is part of the reason that I also didn’t think that AOD was the “answer”. But hey, I didn’t need Perry to find AOD in December and you don’t either….see you in the forum.

Gravity Switch
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May 27, 2009 8:33 am
Actually, I just noticed an older ad from Perry where he used almost exactly the same language but did mention the name, so if there was any doubt this should kibosh it. Here’s an excerpt from that earlier email from a couple weeks ago: “Alpine Total Dynamic Dividend Fund (AOD) will pay you a 20% annual dividend in dependable monthly installments. “How can this be? “Without getting too technical, the fund is able to deliver a 20% annual yield by following a proprietary dividend-capture methodology that Maximizes the amount of distributed income, and Identifies potential dividend increases and capital gains… Read more »
EconoMarcus
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EconoMarcus
May 27, 2009 7:25 am
Sure, you can always arbitrarily pick a certain time frame where even the worst stock (which AOD is probably not) is up more than the Dow or any other index or stock. I was talking about the longer term as you can see above. BTW: If you look at today’s market you will see that most of the stocks that are up most since March 6th are the ones that were beaten down the most – the weakest ones. What might tell us that about AOD? 🙂 Anyway, happy market timing (or AOD timing) then! (If you asked me there… Read more »
spreadtrader
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spreadtrader
May 27, 2009 7:48 am

My time frame is no more arbitrary than yours.

“If you asked me there are better stocks to trade and there are better stocks for the long term.”

…..okay, I’m asking you….which ones?

EconoMarcus
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EconoMarcus
May 27, 2009 8:20 am

I’m not sure whether this is the proper place for this. But ok, just a few quickies:
Playing with DRYS has been fun during the recent months. Risky! No trade without stop-loss!
Swing trading the QQQQ is usually much more relaxing.
Two picks for the long term:
Hyflux Ltd. (SIN:600 or HYFXF.PK in the US)
A-Power Energy Generation Systems, Ltd. (APWR)
Both Asian companies. Do your own research! Good luck!

EconoMarcus
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EconoMarcus
May 27, 2009 8:26 am

BTW: My time frame was not rally arbitrary. It’s simply the longest possible for AOD since it’s only in the market for that long (or short).

spreadtrader
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spreadtrader
May 27, 2009 9:02 am

Thanks. I’ll look at those charts.

By the way, my time frame wasn’t arbitrary either….it’s just after I purchased the bulk of my position. The other purchase was in mid-December and it’s posted in the forum. Either way, weak or strong, I’ll take a 40% gain with a 25% yield paid out monthly over a 26% gain with an 8% yield anyday.

spreadtrader
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spreadtrader
May 27, 2009 8:46 am

Thank you for these perf charts. They are especially helpful for…….spread traders like me.

spreadtrader
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spreadtrader
May 27, 2009 9:07 am

No, I’m sure AOD is it, Gumshoe. I spent some time looking for another candidate and none came close.

Gravity Switch
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May 27, 2009 9:53 am

Oops — thanks Pam. Will fix the omitted “Total”.

John Krouser
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John Krouser
May 27, 2009 5:46 pm

I too got sucked into Perry’s and he is a joke….he does not live on what he buys…..

Gravity Switch
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May 28, 2009 3:04 pm

IIH (Internet Infrascture HOLDRs) probably won’t have anything like that dividend in the future — that represents a one-time payout for Oracle buying BEA systems. IIH looks like a lot of its holdings have decayed over the years, the two big remaining holdings are Akamai and Verisign which make up close to 90% of the value of IIH — I don’t necessarily dislike either of those (I actually like Akamai, though I sold my shares a couple years ago), but you can certainly buy them without mucking around with the other half-dozen wounded ducks in the portfolio.

ic
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ic
May 28, 2009 7:57 pm
spreadtrader
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spreadtrader
May 28, 2009 6:49 pm
Yes, I saw DCA and its companion DCW. The payouts look excellent. But aren’t you bothered by the fact that in March they changed these funds’ strategies so that now they can essentially invest in whatever the fund managers want? I’m not sure that’s really a strategy……plus, from month to nmonth I’d no longer know what it is I’m really buying. From their March news release: “….the Funds will no longer be required to invest at least 80% of their managed assets in real estate securities or have any specific limitation on investment in U.S. or non-U.S. companies, thereby permitting… Read more »
Joe
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Joe
July 1, 2009 12:32 pm

Before everybody gets too excited about AOD remember that it started out at $20 a couple of years ago so the loss of principle (almost $13) is about 4 times the dividends paid to date. The early on investors aren’t as excited about the yield!

Guest
Guest
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Guest
October 14, 2010 11:09 am

Sounds nice Angelo, but the way I understand it, you have to buy the stock before the Ex-Div. date.

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