HYD is exemplifying the aformentioned volatility in recent days.
Suspect some immediate selling is attributable to the thought that new Congress will retain 15% tax rate for dividends into 2011. Thus, money being pulled from Munis into Dividend stocks for the fixed income folks.
Longer term, inflation is always the greater evil and I believe China will be the harbinger. If China inflation spirals, it will affect rest of world and hurt fixed income. That is a ways off, if ever, because China is USA debt holder and would not want to ruin all the low-interest T-bills they hold. Likewise, China will not allow USA to go into inflation and ruin the investment.
Probably not. But, if you're careful over time to buy on the dips you may be able to accumulate a position with a relatively low cost basis and that would help to show an acceptable long term total return. Right now the share price is up a bit. I plan to buy into this myself and will do so gradually over a period of time - maybe years. I am drawn by the high monthly pay out and want to see if I can make that work for myself. Be prepared for the volatility.
Only as part of a balanced portfolio which includes other kinds of bonds in your fixed income sector. Buy and sell not on the basis of price “dips” and trying to outsmart the market, but whether your allocation is out of whack. If this is 5% of your portfolio, sell down when it drifts by 20%. Thus sell down when it gets to be 6% or buy more when it is 4%.
This kind of portfolio management - sector diversity, target allocations and the 20% adjustment rule - is the best way for most folks to get rich over time. It avoids guessing, subjective analysis and emotional reactions. If you have 20 year time horizon, this approach will certainly keep you well ahead of inflation.