“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.