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Alpine Total Dynamic Dividend F Message Board

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  • bluebuick2003 bluebuick2003 Oct 17, 2008 7:07 AM Flag

    Need some advice

    i'm definitely not calling this one a diamond in the rough. that is for sure. banker and energy, you seem cordial and intelligent so let me set forth the following for comment.

    i bought shares before the collapse for three main reasons (i) the mgmt had a good track record with their mutual fund, (ii) diversified fund so seemed relatively low risk on capital loss, and (iii) the attractive yield (at the time i believe it was 10% or 11%). that seemed sound at the time, was i all messed up in the head ?

    now of course (i) has been shot to hell. i'm sure there are some mgrs out there that have done worse but i'm willing to say these folks are right there at the top on the worst list. even the superstars like bill miller (legg mason) and ken heebner are sucking wind this year. (ii) is still somewhat true, still diversified but the combo of the market conditions and mgmt has led to massive capital losses, (iii) yield is still hanging in there. no change in div payout.

    so at this point about the only fundamental reason left to buy is the yield. at some point, the underlying stocks will likely reduce their dividends and AOD will need to reduce their payouts to investors. after that trauma is over (say a year or two from now), the markets will likely recover and so will the stocks held in this fund. they may not beat the market in capital appreciation but you do get a higher yield than if you bought the SPY's. so who knows, the total return may be close to the same. does this sound at least logical ? perhaps even reasonable ? again, this is for a long term investor.

    one thing that really bothers me is the talk about how the high dividend payout is going to drive the NAV to zero. an ANALyst even suggested this on the recent conf call (i read the transcript). i'm 100% positive that mgmt will cut the payout if the div income they recieve is not sufficient to maintain the current payout level. that might not be financial 101 but i think it fits in financial 201.

    they will not sell the portfolio stocks in order to maintain the dividend and thus take the NAV to zero. the NAV is going to ride with the market and the mgmt stock picks. the div payout is going to ride with the dividends paid to the company via the stocks in the portfolio.

    do these last two paragraphs make sense ?


    so for a new long term investor, they get a diversified fund with a high yield and questionable mgmt. but as noted, most mgmt is not looking good now anyway. and it is possible that the capital appreciation plus the high yield can beat the SPY's.

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    • --Diversified? - I thought they were diversified as well. In actually they are sector-oriented.
      I thought they would be moving from Coke to Pepsi and own the whole market. They really just own what sector has been hot. They don't own that much variety. And they concentrate.
      --Yield? That was what I was thinking. The dividend rotation idea is not a standard strategy to get that extra yield.
      --Hebner et al..? I worked on wall street for years. When I became a VP I thought that all the people would be like me (141 IQ, confident, pragmatic, arrogant, organized). It was not the case! There was tons of insecurity and really about 5% of the people did all the thinking and all the work. In this market 85% are going to be smoked-out with Bill Miller types remaining. There are way way way too many wall street players many of which are frankly not qualified to be there.
      --Capital loss? This is really a management problem and a strategy problem. The largest problem is not being diversified. It sucks to be diversified because you limit upside. The churn is so large 400% they cannot afford to be diversified. They need to cover this huge cost of shifting around. That is why the dividend harvest strategy is such a small part of the portfolio. They have to earn outside of that strategy to make up for the entropy inherent in it.
      ---Maintaining Yield?They said the yield can be tuned to what ever level they want so I would agree there would be no change in the payout. For the mean time (not talking AOD here) as stocks get lower in price they pay larger dividends.
      -- Future? I think stocks will be flat for a long time to come. 50% down takes 100% up to recover. That is why protecting your capital is the most important thing not dividends. I think a strategy that can deal with a flat market is much more of an advantage.
      --GIFT MOMENTS - If the goal is yield and preservation of capital then there are gift moments in which a mistake can be corrected. I found at least two funds which offer a better alternative to this. With AOD there have been gift moments to improve the situation.
      1) We saw a 20% up day. On a day like that you can sell and buy one of the alternate funds. You are taking the same money you have (plus that day's appreciation) and you can allocate to a better strategy that is really diversified and has downside protection or a better way to get income stream.
      2) CEF's trade at discount or premiums to NAV. IMHO this is very important. I might buy AOD down 15-20% to NAV. So the idea is sell at NAV and buy at discount. By rotating in this way you are capturing a hidden gain of 20%. This is very important if you are the holding type. If you drive a chevy which is at value and then you find a ford selling for 20% less but is essentially the same car who cares.
      I make mistakes every day in investing. An important rule is not getting emotional and thus holding on to a mistake. The situation needs to be improved every day.
      "one thing that really bothers me is the talk about how the high dividend payout is going to drive the NAV to zero."
      --Div ? -I am quite convinced that the dividend payout is not killing the NAV.. Its really the churn and the trading. Additionally the strategy is good in an up market and bad in a trending market (which we may see for a long time to come) This is really deflation a very very hard environment.
      I feel sorry for everyone who is in this thing and depends on the income. Frankly it is unfair.
      There are movements and strategies which are gifts. We are at NAV and this is a gift moment.

    • Blue

      Nice play on "ANAL"yst.
      I'm not an economist like Energy, I'm an engineer, so I am quite good at 8th grade arithmetic. That's how I came to the conclusion that they must be selling holdings to continue the dividend. You just have to step back a bit and you can see that in a bear or flat market the dividends can't be actual dividends that their holdings are distributing. Also, AOD's dividends are "ordinary", not "qualified".

      The holdings (NAV) are dwindling (must be), so an upturn in the market to previous levels will not be enough to restore the original value. eg: You bot 100 shares of IBM at $100 and over time you sold 50 shares to distribute cash to yourself. You also collected 5% dividends from the stock. You now own 50 shares at $80. Your original $10000 is now worth $4000 and you have collected cash from the 50 you sold and the 5% dividends--not 20%--along the way. You spent all the money you collected. This is a good analogy to what AOD is doing, IMO.

      In order to recoup your original $10,000, the 50 shares you have remaining must go to twice what you originally paid per share, or $200.

      • 1 Reply to banker6991
      • energy,

        you are a trader. i do some trading myself but i have AGD/AOD in my buy/hold portfolio. your thoughts on when to buy/sell are spot on. as far as my diversification comment that was really relative to buying several single stocks, where you may face a sudden BK and get wiped on one of them. AGD/AOD are diversified in that sense. you are correct that there is sector concentration and they've played those poorly. my main mistake was not putting in a stop loss (me=idiot). but these two stocks, which are really the same since they own much the same stuff, are about 4% of my portfolio and that is using my cost. value is 2%. i own some other CEF's but they own preferred's or if they own common, they write calls to juice yields. so i feel like AGD/AOD fit in okay for my overall diversified portfolio. i could sell and go somewhere else with the money but i have alot of cash to invest now. i sold almost everything on 8/16/07 so i have money for new choices.

        banker,

        please read the transcript from the recent conf call. mgmt clearly states that they are not selling stocks to cover the dividend. the dividend payout is 100% covered by dividends they receive from the stocks they own. while we've heard many CEO's flat out lie about the health of their companies (the last guy at bear stearns was the all-timer, alan schwartz i think), i don't think mgmt here is going to lie about the div payout. if they need to reduce the payout because they collect less, they'll go ahead and do it. and investors shouldn't be all stressed out when that happens (it will happen, probably in the next six months).

        if you read the transcript you'll see an ANALyst asks about the div payout and the NAV going to zero. this guy gets paid to cover the stock and he can't even understand the basics. @#$%ing incredible. he thinks the mgmt is going to maintain the dividend regardless of what they receive and go ahead and liquidate the portfolio. i think that means they lose their mgmt fees along the way. so they have motivation to change the payout to avoid selling stocks and returning capital via dividends.

        by the way, i was a banker until i quit mid-2006. i got sick of having to approve all the ridiculous loans that came across my desk (all types of real estate). the basis for making the loans basically came down to "somebody else is going to do it so why don't we". lehman, wachovia, and csfb were the worst. they did anything.

    • blue buick20, nice piece of information and I agree with you. Bought in for the long term a few months ago (54,000 shares). If we all would have known what was in the wind could own 108,000 shares now and if AOD cuts the dividend no big deal. If they cut the dividend so be it, will stay for the long term like Warren Buffett says, Buy and Hold.

      • 1 Reply to jetpilot989
      • I am not a blackrock fan.. Some of the leveraged funds are horrendous.

        The idea that your capital is protected here is nonsense. The idea that you will in some way get 100% appreciation by holding (so you will be even) is even more nonsense.

        The only way to make money here is to wait until the NAV is 15-20% higher than the trading price and buy thereby locking in the differential. If you buy at NAV you are throwing money away as it is the time to sell.

        If you notice the fund trades near NAV around dividend payment time. So you sell just before ex-dividend and you will actually pocket much more than waiting for the dividend to be paid. You buy something else at a discount.

        Some small cap companies in good to buy because they are trading at cash. Many small companies pay no dividends but if they are cash rich and they have an idea they will go up 100-200-1000%.


        You have to count on economic activity being a shell of what it was. You have to hope that Government will spend as much money as possible and will do things that are meaningful such as building nuclear plants (The big M), or trains, or efficient cars (The big O).


        This is a deflationary environment. Nobody believes it. Nobody has seen it. Nobody knows how to react to it.

 
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