That it could have produced $0.36 dividend when the NAV was $13 back in July? I'd like Alpine management to post weekly on the website some info that would build confidence in the dividend capture strategy they have created and get some respect for a 30% yield. Things like: dividends earned last 30 days (with approximate Qualified Dividends), leverage used, portfolio % devoted to div. vs. growth, asset losses or gains in trading for dividends. Alpine needs to differentiate their performance from other discredited schemes recently in the news.
as i've said on this board a few times, i'm trying to give mgmt a pass even though they've lost so much money. it is easy to get angry at the losses and blame mgmt, etc.... the market has been tough for every fund that holds stocks.
i believe the div capture strategy can be effective whether the market goes up or down. and a special dividend play here and there isn't so bad. but i wouldn't want the special div income to account for more than 5% of the earned income.
this lack of disclosure on regular versus special makes me think the special piece is much higher. i could be totally wrong but when they don't disclose it, it makes me wonder.
the real classic is the ANALysts who get paid to follow this company. how can they not ask how much of the earned income came from regular dividends and how much came from special dividends.
take this analogy, is it good to know the relationship btwn the fund price and the NAV ? would you buy this fund w/o knowing the NAV ? i think we'd all say "no". to me, not knowing the amount of special dividends is akin to not knowing the NAV. you are putting alot of trust in mgmt.
the reason i haven't sold all of my position (only 50%) is i don't think mgmt wants to drive AOD into the ground. they get fees and such so it makes sense to maintain an asset base and not distribute it all back to us shareholders.
here is a cut and paste from another CEF i owned back in 07 (ticker is LCM):
a diversified closed-end management investment company, has declared its quarterly dividend of $0.264 per share, reflecting a reduction of $0.086 per share from the Fund’s most recent quarterly dividend. This represents an annualized distribution rate of 14.35% based upon the closing market price of $7.36 on November 28, 2008.
The Funds’ management believes that reducing the Funds’ distributions is a necessary step to enhance our ability to maintain and potentially grow the Funds’ net asset values—which should benefit the Funds’ shareholders over time.
The Funds’ management also believes that convertible securities appear exceptionally attractive following an unprecedented dislocation in convertible and high-yield securities markets, which presented the most challenging and difficult credit conditions since the Great Depression. The Merrill Lynch All Convertibles Index (ticker VXA0) lost 22.8% over the last two months, as both equities and corporate bonds plunged. The Merrill Lynch High-Yield Master II Index lost 23.4% during the two-month period, and was yielding 21.7% at the end of November.
The Funds are being repositioned in an effort to take advantage of current opportunities in an effort to better achieve their investment objectives of providing total return through a combination of capital appreciation and current income, along with seeking to enhance the Funds’ earning power over time.
LCM's primary goal is high income to investors, just like AOD. however, they've decided to give up some of the income for now and buy assets. hopefully generating good asset growth in the next 12-18 months.
i'm going through LCM now as i may move my AOD/AGD holdings over to LCM. i like the decision LCM mgmt made and would like to see AOD/AGD do the same thing.
Bingo. Your post is completely accurate. Unfortunately, many here don't want to focus on the truth or simply don't understand the facts. When I posted similar points about a month ago, the response was downright nasty.
In yesterday's mail, I received AOD's annual report. Once again, Jill gushes about the TWC $8 dividend to be received in a few weeks. Does anybody really think that TWC, which basically has to borrow the money to pay the dividend required under the Twx spinoff, will recover the $8? They sure won't and it's really sleight of hand. I only like AOD when it trades at a significant discount. Otherwise, the .18 doesn't impress me because much of it is effectively a return of capital.
The stocks, reits, MLP's they use to capture dividends each month may have to change frequently due to market conditions. I saw a list of the stocks in AOD once - it was very, very, long, so they may have to be flexible and move around a lot. There were some very good, stable companies in there; NLY, JNJ, etc.
They used to have a lot of international stocks, but said that's what caused the fund's NAV to take a hit, so for now I think they're more in U.S. stocks.
There was a good article on AOD on seekingalpha.com. Put AOD in the search box and a link to it will come up.
i would tend to disagree with:
"the financials tell us the dividends are earned income".
that is technically true but special dividend income is considered "earned" income" and i would categorize special dividend income more as return of capital. i think most would agree that a stock really doesn't recover to pre-special dividend prices within a short time (a few months). so any special dividend income should be conservatively viewed as return of capital. if a large portion of the income from the fund comes from special dividends, then the real truth is we get capital back. not income. that is why it is so important to know the breakdown on dividend income, reqular and special.
"the company does not want to expose their program down to the individual stock"
i've thought about this often. i'm not really sure it matters if their div capture moves are made public. but i'd be willing to deal with them keeping it somewhat confidential if they would just break out special dividends versus regular dividends. that is the info i'm really driving at by suggesting they tell us their top 10 income drivers, so i can see if they are special or regular.
I really believe in Alpine's dividend capture strategy (I'm long) and just want some data to confirm my faith. For instance, I'd like to have some info on whether they're barely making the $0.18 or there is plenty of leverage or some growth portfolio to shift to dividend strategy, if necessary. How should I estimate my 2009 estimated IRS payments re Qualified Dividends @15%? (Granted the new Washington team may change that anyway!)
I may be wrong, but here are my thoughts on how their dividend recapture strategy might work to help maintain their high dividend levels.
I'm not saying AOD is investing in preferred stocks, but let's assume a $25 par preferred stock issued by a stable investment grade utility/power company that pays a quarterly dividend. The market price of this type preferred has remained fairly stable throughout the current market environment, and the market price has not tracked the value of its accrued dividend. So, they buy the stock prior to its record date, hold it a few days to collect the dividend, then sell the stock and reinvest in another similar stock prior to its record date. There are enough good preferred stocks to repeat this process over and over and easily collect 6 or more quarterly dividends each year. Semi annual dividends would be even better.
They find 2 stocks with staggered dividend dates in the 1st month of each quarter, and thus double the dividends on the same $25 investment. They do the same with the other two months of the quarter. What they end up with, is at least six dividends per year on the same $25 investment. If their stocks average only 6% yield to par, then they are earning a 36% annual yield ($25 x 6% x 6 = $9 div). If they take a little more risk, there are plenty of investment grade preferreds currently yielding better than 10%, and this would yield 54% annually ($25x 9%x 6 = $13.5 div). Obviously, there will be some market price volatility, but I can see how Alpine would have plenty of room for moderate market price fluctuation, and still be able to pay a >30% dividend.
I agree with hggillialand. I read an article written by a retired stockbroker once explaining how to do dividend capture with common stocks, reits, MLPs', etc., claiming the strategy could theoretically earn a 100% return in a year if done right.
He said it can work very well in a volatile or bull market. It would seem logical that when they put in their buy and sell limit orders for stocks, they can often get their desired prices on stocks within a few days and realize some small amount of capital gains in addition to the dividends. AOD is not limited to making money just by dividend capture.
The writer of the article I read discouraged attempting it in a bear market, however, when you would buy stocks for the dividend and the market might then keep dropping, making it difficult to sell anything without taking a capital loss that would offset the dividend.
Makes sense to me, as does the above theory involving preferred stocks. I trust Alpine and I think they know what they are doing.