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Alpine Dynamic Dividend Institutional Message Board

  • mike57dk mike57dk Dec 13, 2009 1:07 PM Flag

    Dividends - explained - pour the Kool-Aid please !

    Lots of posts questioning how this fund can continue to distribute the HUGE dividend ...so ..lets take a stab at explaining with the priviso that you MAY need to be drinking the Kool-Aid to completely BUY the strategy ....
    Start with an example of $1,000,000 invested in US high dividend paying stocks ... typical investor could expect to earn four quarterly dividends in the coming year ...probably at a 2% average or about $20,000. This fund is "capturing-dividends" ...essentailly buying the stock just before ex-div date and selling shortly thereafter ...30 days ? 45 days ? in that fashion ...Instead of 4 dividends per year ...they could hypothetically "capture" as many as 12 ...( Kool-Aid now ) ....so the $1,000,000 invested in 2% dividend stocks now earns $60,000 at "warp 12" ...NOW ...they also invest in foreign stocks ...Nintendo for example ..who pay dividends ONCE or twice a year ..again ... they could then capture HUGE dividends at "warp-12" ...and finally they look for one-time special dividends ..such as spin-offs or cash payments ... and there have been some ...
    In a difficult market ... these guys were getting hammered ... stocks down / dividends falling ...In an UP market ..the portfolio manager has been more aggressive ...( warp 8-10 Scotty )
    Summary - This is a RUN & GUN investment fund ... there is no return of capital ...just dividends captured and some short gains on the stocks sold ...similiar to Run & Gun teams ...they have no defense ...except the dividends recieved ....If your broker tried this ...it would be called "churning" ...or dividend selling ...but in a recovering market ..it works out pretty well ...hope this helps explain what they are trying to do ...must go ..am late for my flight to JONESTOWN

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    • After seeing the willful refusal to understand the ROC issue by posters across the msg bds, I've come to appreciate the need in CC's put things in the simplest of terms for those that get into that, "If I have to use my brain just the least bit, I'll just shut off my ears."

      ROC acctg should not effect ROTH's or IRA's at all.

    • Let's look at LGCY 3 month chart:

      http://finance.yahoo.com/echarts?s=LGCY#chart6:symbol=lgcy;range=6m;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

      Can you see on it how to max out a few trades that would exceed a simple buy and hold?

      See the dividend chasing hump(s)in other charts? Not an ideal options mkt underlying this one, but I've gotten some good trades in this channel in the past 6 months.

      Bonus on this one is that there was a not so sincere bid to buy this pup at 13.5 that held it down (or, in a sinking oil price environ, a subtle prop up). BOD finally stopped dragging their heels and rejected the offer.

      Point is maybe I was lucky, maybe a bit savvy. Full time traders can work channel trades with the help of options and sophisticated software far better than me.

    • The holding period for ADVDX managers is 61 days to conform with IRS regulations for Qualified dividends (which are taxed at the favorable 15% rate instead of the ordinary income rate (25% and above).

    • Mike nice try.You forgot to mention that a stocks price drops usually by somewhere around the dividend $ amount that they paid out.They would need to buy tons of puts to cover their behinds.That would cost $ and offset the income/dividend.Also they buy alot of foreign stocks which are VERY volatile , especially so after divi is paid.With more large stable US or European companies, the divis have been getting smaller and smaller.I think the average US large cap pays out 2.5% yearly in divis on average.

      Another point that has not been mentioned is that when it gets near to a stocks divi record date , the amount of shares that you want to buy might not be for sale at the price you want to pay.Now a decent size fund like advdx might need to buy tens of thousands of shares of X company and they might not be all available for sale.They will probably need to purchase the puts as well.

      Why hasn't buffet, goldman sachs or the rest of the masters of the universe caught on to this fund and hired all the managers if they can achieve these types of returns?

      WHY?

      • 3 Replies to cb98on
      • Why hasn't buffet, goldman sachs or the rest of the masters of the universe caught on to this fund and hired all the managers if they can achieve these types of returns?

        WHY?

        CB88.....the answer to your question may lay in the law of "large numbers". Buffet himself has said that you won't be able to expect the same growth as what he's achieved in the past. This fund is only approx 500 million....rather small in the investment universe....that allows them to be rather nimble without undue pressure getting in and out of positions. Obiviously there are many, many strategies offered out there and if everyone followed the same strategy at any one time, none of them would work.

        Jill(portfolio manager) has a question and answer letter on the Alpine site for ADVDX. She mentions the higher European payouts in general with a semi or annual payout....this leaves me to conclude that you are capturing a much larger portion of the annual divvy on every turnover! That's all I can add at the moment as time is short! Good Luck!

      • One reason is greed. GS isn't satisfied with "just" 20% ROI; they want 50%, 100% and more.

      • Cb98on- good comment ..I do think they try and HOLD the stock 30-45 days seeking a stabilization of the price ...thats what they say on the conference calls ...anyway. The idea being that in a decent market that the typical stock will rebound fairly quickly post dividend ...
        well ...it works in a rising market ... but as stated earlier ... its a "matador-defensive strategy " ...Ole ! as we have seen the price crash harder than comparable indices ...

        As far as why the big investment gurus and why they dont do the same thing ? SIMPLE - this Run & Gun bull market strategy is a cinch to eventually get burned ...they have to ...their short term rotation into and out of stocks ...guarantees they will catch a loser ...while missing any upside a long term holding might provide ..
        Their manager emphatically states that they DONT DO options ...no PROTECTIVE PUTS or COVERERED WRITES ...neither do they borrow money or hold bonds .. a pure stock market play ...with about 100 stocks on average ...
        On the last conference call ..they were talking about how well the dividend capture tactic has worked over the last six months and were placing a larger percentage of assets in this methodology ...up to 50% I believe ...but please check that ...
        SUMMARY - This is a supremely AGGRESSIVE tactic ...individual brokers / money managers cannot or would not try this ..the outlandish yield has clearly attracted many INCOME investors ...and perhaps folks looking to essentailly "Call-the-market-bottom" at $5 per share for ADVDX ...my point - keep the risky stuff to 10-15% of portfolio ..or failing that ...keep your finger on the SELL trigger ...thx for comment

 
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