the reason i think the dividend will be cut is they can't earn 10% on their NAV/investments. the good news is, i don't believe they will cut the dividend until AWP trades at a premium to NAV. so as long as investors sell before the premium appears, they can expect to receive the current dividend level.
i'm sure the next question is why don't you think they can earn 10% on their NAV. yes, there are some high yielders in there, i think the 15% are mortgage REITs like NLY and AGNC. yahoo shows 16% for NLY and 21% for AGNC and that one is on the june 30 fact sheet as a dividend capture holding. but one has to take into account the potential capital loss and net that against the 15% to 20% yield. sometimes that can be a net gain of only 10% for NLY or 15% for AGNC. alot of other regular REITs yield btwn 3% and 4%. so when you blend some high with the low (i think AWP alot more on low side than the high side), you may be looking at an income stream of 6%. so they'll need some profitable investments (gain of 4%) in order to make the 10%.
then one might say, NAV was up 36% for the 12 months ended june 30, 2011 so the 4% should be easy. but that gain evaporated and the NAV went from 8.40 to 6.40 in just over 3 months (down 36%). then you get to the dreaded math of getting back to even on a 35% loss. you need a gain of 53% to get back to even.
they started with an NAV of $19 and an annual div pay of 1.52, or 8%. they couldn't pay that, had to cut. understandable given what occurred over the last couple years. but i'm not confident that they can earn 10%.
i had a debate with a guy on the AOD board back when i was long AOD in 2007. he said they'd never be able to pay the 10% each and every year and the NAV would eventually reach zero. i said there was no way that could possibly happen. they would adjust the payout if the NAV went down and it was clear they couldn't make the dividend. his handle was/is 'gentle rhino' and he was right. it isn't at zero but i never thought it would be south of 10.
this isn't going to collapse like some madoff ponzie scheme. it will be a slow motion train wreck and each time there is a huge down draft in the market, another car goes off the tracks. so there is alot of time to go here and i could be wrong. but it was sad to see the commentary on the AOD board. people were in serious denial when it went to a premium. claimed all was well when it wasn't. as long as people know to SELL when it AWP and XAWPX are approx. equal, they'll survive.
as far as return of capital, i don't get into the fancy accounting methods of calculation for that. to me it is real simple. if they start the year with 8 in NAV and payout .60 they need to end with NAV of 8 or more. that means they earned the dividend. if they start at 8 and end at 7.40, they returned capital.
some might argue with this given the discount btwn XAWPX and AWP. since you paid less for AWP, return of capital can't happen until the two trade at roughly the same level.