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Alpine Dynamic Dividend Institutional Message Board

  • paulina5012 paulina5012 Aug 11, 2010 5:59 PM Flag

    Mysonchino / Question

    On these following funds / ASP /BSP /CSP / and SLA-----
    The FAF advisors state, " A return of capital represents a return of a shareholders original investment in a funds shares."
    Do you think this is a (just in case) statement---or are they giving us our own money back plus a dividend?? Thanks. Paulina 5012

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    • mysonchino /
      Thank you very much for the info. I really appreciate it.
      Best

    • Paulina,

      My largest holding in an option income fund is JCE. It is a fund that holds core quality equity, receives dividends and sells options on half of the portfolio. The option sales generate cash flow which is generally accounted for as a return of capital and not immediately taxed. In a range bound market the option income generated by option sales helps support the dividend.

      I mention JCE because it is not leveraged, sells at a discount, is more than just an index, and does not pay an enormous dividend that would be more difficult to sustain than what it currently pays. Nuveen has a number of unleveraged CEFS that provide exposure to the S&P 500 or NASDAQ. Check their web site for CEFS and pull up the fact sheets for those funds.

      I also like preferred funds. My largest holding FFC. This fund is leveraged, pays a monthly dividend but currently sells at a premium. John Hancock has a few that are of the same quality (80%) investment grade leveraged but sell at a discount. Check their website. Using the Nuveen CEF scanner you can check historical performance, percent of the dividend being earned and historical dividend payout amounts. With preferreds I like to have as close to 80% investment grade as possible, as close to 90% of the dividend earned and the only down year for NAV being 2008. GL.

    • mysonchino / Thanks again for the information. I know some of my questions seem like class 101. I asked my wife's grandfather one time if the market seemed like the crap tables in Vegas--because he liked both. He paused for a while and said YES! The non leveraged option index funds are above my pay grade, and seem like betting a hard four on the tables. Only kidding. Can you please give me a few of those funds that you would recommend---and I'll do my DD on them. Thank you again for your patience. Pacifico Lite has not reached the states yet---I am keeping a watchful eye.-because you mentioned we could drink three safely. I remember the damndest things. Best

    • Paulina,

      Technically no. They "earn" the dividend. However, there are costs envolved in doing so. Not only transaction costs but the "risk cost" of trying to trade the market. When they paid out 20% dividends they could not do it. Now with a reduced dividend the task will be more possible but we will have to wait and see if it is probable. Personally, I think non leveraged option income funds would be a better bet. They will be much more tax friendly and generate their cash flow for dividends(it is not technically accounted for as earnings)in a predictable fashion by collecting dividends from their equity portfolio, seling options against it and generating capital gains along the way. GL.---Chino

      • 4 Replies to porkus_chopius
      • Porky,

        Thank you so very much for assuming my secretarial duties and answering questions for me. Unfortunately, because of your tendency to pump and run (review your advdx postings) you are fired. Nothing personal, it's just that consistency and a memory are essential when dispensing advice, especially when it is unrequested of the party so freely offering it. Good luck. If you want a letter of recommendation for your next position don't hesitate to ask. I will be honest and direct.

      • Thanks. Jazuzz--The Government never heard of KISS! no wonder the IRS recently said in the newspaper, that the tax code is now so huge and confusing, that they even they don't fully understand it anymore. Too many liars---I mean lawyers in Washington. IMHO

      • Great info MR P., however the example given of a vehicle written off (depreceated to zero), may not in fact be worth zero and have a salvage value which would be subjet to recapture if sold.
        OFTEN After many years of operation a company's property will have appreceiated to be far in excess of the business value, so the owners caN SELL, PAY THE CAP GAIN TAX AND STILL HAVE LOTS LEFT TO RETIRE ON. If they had been depreciating the property they would also pay tax on the depreciation they took, called recapture.

        The ideal is to not sell and pass on to one's heirs. they get the asset at the new appreciated value and there is no tax, except as inheiritance taxes may come back, but there is still a million or so that can pass tax free..
        People hire tax attorneys and financial planners to work out their affairs becase this sh-t is complicated and to make matters worse the friggin gov't keeps changing the rules....buy gold and bury it, maybe.....LOL

 
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