AOD Month

I have written elsewhere that dividends are always a plus for long-term strategies. Sadly for patient dividend hounds, Alpine Total Dynamic Dividend Fund (AOD) has been in bear territory on the monthly chart since May (not to mention it being far less attractive with its recent massive dividend cut).

In fact, AOD presents investors with a quandary. The old dividend was $1.44 a year (paid in monthly installments). The new one is 66¢ a year (still monthly).

If I already own AOD (as I do), then I can simply hang on, and even add to my position at the present low price of $5.05, knowing I'll get a 13.06% dividend and guessing that as the global recover proceeds, then dividend will eventually be raised to more competitive levels.

(See my discussion of whether AOD is competitive.)

There's nothing wrong with bargain hunting. But contrariwise, it's stupid to put money in declining a stock. Bottom fishing is considered a bad game; how much more so bottom diving!

If I have not yet bought AOD, then I also have a quandary. I can buy now for the 13.06% and hope for better dividends in the future, as above. Or I can wait for a bull signal on the monthly chart, with a close above the 12-month simple moving average.

The ma is now at $7.72, which is at 8.55% return. If I wait for a bull signal, I lose 4.5% in dividends, with guarantees that the dividend will ever be raised. However, I do protect my capital stake from a further price decline.

In sorting this out, it must be noted that AOD has maintly been a massively downtrending fund for most of its history. The prices have often been on the anemic side. The most recent bull phase, lasting 12 months, produced at 13.5% capital loss, because of the suddenness of the May decline below moving average.

Bottom line for me: I'm OK with adding to an existing position in up months (as July is so far). I wouldn't open a new position; there are alternatives that are far more competitive.

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The Great Reflation: How Investors Can Profit From the New World of Money
OK. The credit bubble burst. Housing, burst. Shockwaves reverberated. Markets collapsed. What lies ahead as we reemerge from the wreckage.

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Disclaimer

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.


No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.