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Alpine Dynamic Dividend Institutional Message Board

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  • mike57dk mike57dk May 3, 2010 1:29 PM Flag

    Salvaging my ADVDX position

    Check out shares of ETY - a covered write only fund ...holds mostly big cap / blue chip stocks and sells CALL options at the next higher strike price of the underlying stocks at the closest expiration ..typically 30 days duration.
    The fund takes full advantage of the extrodinary tax treatment of exercised call options and provides a approximate 11.8% yield / quarterly payment ...next dividend due in a few weeks ...$0.40 per share ...so in 13 months ...you could expect to collect FIVE $0.40 per share dividends ...almost 15% return ...and 90% should be tax-invisible ...Since the fund has large embedded losses from 2008 ...there wont be any capital gains taxes for 2010 and 2011 ... so you get a 15% tax advantaged yield over 13 months of investment duration ...and hold the major blue chip stocks ...IBM, MSFT, HP for example ...if the economy continues to recover ...the fund NAV will continue to appreciate ...think the fund is trading at a $0.07 per share DISCOUNT to NAV right now ...The fund's latest quarterly report shows that they are making the quarterly dividend without a problem ...and the tax advantaged aspect of the distributions should make up for the loss of income from ADVDX ...which will be taxed in 2011 at a new and outrageous rate ...some say up to 39% depending on your tax bracket ...

    I dont follow JCE but the emerging markets seem risky ....and the ETY already gives you equity market exposure ...look at FTT ...a recent fund that came out at $20 per share and true to form has dropped to the $18.50 area ... the fund is composed od 100% US Treasury bonds ...but also sells CALL options ...and interestingly has a FUTURES component where the manager can BUY / SELL futures contracts each month ...this gives the fund a chance to counter the impact of rising interest rates ...which demolish most fixed income investments ... with Greece / Portugal / California / New Jersey decending into a third world like bond crisis ..why own anything that is not a direct obligation of the US government ? still AAA ...at least for now ...FTT pays monthly and the annualized yield works out to about 7.8% ...for the SAFE portion of your portfolio ....

    Summary - 30% to fixed income / US T-bonds to diversify and reduce risk in the portfolio ...30% to ETY to create a strong quarterly income stream ...with a good upside potential ...you could continue to hold on to ADVDX ...but the high taxes coming very soon and the weak performance over the past few months, as you have pointed out, indicate that Alpine may be "straining" to produce the monthly dividend ...a cut would be devastating ...both FTT and ETY are earning the dividends amd seem to be in good health ...

    hope this helps -

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    • Mike, thanks for the info. I already own ETY and it has been a good investment that I believe will continue to provide nice returns.

      I have been following FTT but am a little skiddish as to what will happen if or when rates rise. I like GABUX too but am holding off for the same reasons.

      Take another look at JCE. They hold core equity. All positions are from S&P 500. Sells at a nice discount and only options 50% of the portfolio.

      • 1 Reply to mysonchino
      • good comment that relates to the reason most bond funds will get clobbered when rates rise ..as they must.

        The key aspect with FTT is the futures and call options ...that allow the fund to "bet" each month on the driection of rates ...this is almost unique in the mutual fund world ...but common in the hedge world ...the sub-acount manager is terriffic ...having posted GREAT results over the past few years ...

        The fund is new, comparatively small and the story is unknown ...the recent market action has blown off about 8% of fund value ...making this a decent investment ...US Treasuries yielding 7.8% ??? sounds good to me ....

        maybe the price will continue to decline ...keep it on your WATCH list ...

        good luck ...good hunting

    • I'd add EXG and BGY. I own the latter and continue to consider the former.

 
ADVDX
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