Alpine Global Dynamic: High Yield Fund at a Discount

I added the Alpine Global Dynamic Dividend Fund (AGD) to this site’s Income Portfolio, primarily to get some exposure to higher yielding international stocks. I like the fund for several reasons:

• It gives exposure to high-yielding international stocks.
• It does not use leverage or pay out capital to sustain the dividend.
• It uses a dividend capture strategy to collect extra dividends during the course of the year, enhancing the yield.
• High dividend yield, paid monthly.

However, this closed end fund has not been performing well since the start of the year, with further acceleration downward over the last couple of months. I chalk this up to a couple of reasons: They have a significant international exposure, which has generally underperformed for the last couple of months. And, primarily, many higher yielding stocks will be financials, which have been hit as hard throughout the world as well as on the U.S. markets.

A final point hurting the share price has been the erasure of the share price premium to NAV. For the last several months the shares have carried approximately a 10% premium to the NAV. By yesterday, the premium had been erased to a slight discount. This is the first time since May 2007 that the shares have traded at a discount to NAV. I am not sure this means anything other than a buyer is not paying a premium for the shares.

At this price level the shares are yielding over 13%. During a recent investor conference call, the management team indicated the current dividend could be carried through at least until the end of the year. Over the last few months, I have become painfully aware of trying to catch the bottom of stocks falling this rapidly, but it appears at this yield (assuming it holds), the bottom should be near for AGD and you are being paid well for the speculation.

Note: I currently do not have a position in AGD.

Comments

[granger]

I have been holding the AOD. I recently began accumulating agressively. I like that fact that the yield is generaged by good old fashion hard work and not leverage.

[oldtrdr]

Although not an "expert" on CEFs, I own a couple, and from my reading/studying of this particular market niche, it seems to be preferable to buy at a discount to NAV, if possible, somewhat like purchasing a stock for less than "book value". Oftentimes, CEFs in "popular" sectors trade at a substantial premium (IGR springs to mind).

[Jagged Little Pill]

Year-to-date, this CEF has gone down a whopping 35.90%. If the dividend gets cut, you will see investors leave like rats off a sinking ship. Dividends are of no value whatsoever when your principal is eaten away by price decline. The current yield of nearly 15% is great for new investors but if you purchased in 2007, I feel your pain.

[camy]

Tim, i just wanted to let you know that, i enjoy each and every post. Keep them rolling.. Happy 4th July.

[J.E.C.49]

Anything that offers a 14% dividend can not be sound. How many investors wouldn't jump at the chance to put all of their money into investment vehicles that are yielding 14% and go play golf?

There's an old saying, "something is rotten in Denmark".

[Jagged Little Pill]

At a discount? That's an understatement. I've lost my shirt, pants, and one shoe. Soon I'll be naked. This dog don't hunt.

[Be a Man]

Take the High Dividneds and wait for the turnaround next year. Short term thinkers lose with any stock. America IS a bunch of whiners.

[Jagged Little Pill]

Turnaround next year ..... LMAO! It will take more than 3 years of dividend collection just to break even. Meanwhile, money is being lost to inflation and not being invested in a 3.5% money market.

[jegan ;-)]

If I recall, AGD is run by the same management as ADVDX. ADVDX has been paying 14% for ever and the ETF and Fund both use the same formula to derive income. The market is down and the funds are down. **If** we ever turn the corner, you should get good appreciation and a great dividend. I only own two funds, ADVDX and CGMFX because the management of both of these funds are quite nimble and are very forward thinking.

jegan ;-)

[tree_toe_bandito]

I think what is going on is that they buy the stock before the x-dividend date, and sell afterward. Since preferred stocks trade flat, the stock price drops by the amount of the dividend on the x-dividend date. So you are getting a dividend that is really a return of capital by another name.

[tree_toe_bandito]

If I am wrong, let me know and I will buy the CEF.

[Minimus]

Are you recommending NOT to buy AGD based on their strategy of buying dividend stocks? Is this a moral question, or does it not make sound business/financial sense?


On Aug 13 04:55 PM tree_toe_ban dito wrote:

> If I am wrong, let me know and I will buy the CEF.

[tree_toe_bandito]

This is not a moral question. I am concerned that a portion of the dividends might represent a return of capital. Since May '07 the NAV has dropped about 40%. By comparison, ETV NAV has come down about 12%. In that time AOD paid $2.88 in dividends, and ETV paid $2.38 in dividends. Please check my numbers, I'm not good with numbers, but what I am saying is that it seems to me that the ETV strategy is better than the AOD strategy. When I try to understand why, it seems to me that the dividend capture plan is not working well. I would appreciate any ideas, comments, corrections. This is not a moral issue. This is an issue of what is the best investment for us, where "best" is the most return on investment.