Wednesday, July 7, 2010

AOD Watch

The much-shrunken dividend play Alpine Total Dynamic Dividend Fund (AOD) has moved to bull phase on Persons's Proprietary Signal (pps) for the first time since before the dividend was sharply cut.

It's an early sign that the worst of the AOD-bashfest is over, and traders are trying to find a price that reflects best expectations for future returns.

AOD $5.20

When the dividend was cut, from $1.44 to 66¢ a year, paid out monthly, the price merely continued a slide that had begun two days earlier. Smart money reading the tea leaves? Lucky guesses? Who can say?

The stock reached a swing high of $7.59 on June 21, four days before the announcement. It reached a low of $4.83 on June 29. So the total carnage was 36%, and the dividend yield had fallen from 19% at the swing high to 13.7% at the low.

Today, with the price at about $5.20, the yield is 12.7%, in line with other large high-yield funds. That's a long way of saying that AOD is no longer above average as a dividend yield play.

I don't expect the price to go much of anywhere until it becomes clear that the dividend will be raised again.

The fund began to have problems when the euro headed south because of Greek debt, German inflation-phobia, a euro-zone central bank with limited powers, Spanish debt, angst, unease, spring rains, whatever.

The fund managers were slow to cut the rate -- the euro had been in deep trouble for months, and the fund had heavy European exposure. I presume they'll be quicker to raise the dividends, because a high yield is the life's blood of this fund.

Price changes will be based in part on what happens to the euro. But the fund's exposure to Europe, day by day, is an unknown for the trader. A top 10 holdings list is released monthly.

So if the euro recovers, there are no guarantees that AOD will benefit. The managers may have sold their euro-denominated shares. Like a mutual fund, the AOD closed-end fund is a black box to its investors.

I'm in AOD from before, so I'm holding, and with a bit more confidence thanks to today's signal. But I won't be adding shares until I see some price movement that confirms the signals. That would mean a rise up to $6, the price before the stock gapped down on the dividend cut announcement.

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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.


  • psar - Parabolic Stop and Reverse
  • adx - Average Directional Index
  • pps - Person's Proprietary Signal
  • ma20 - 20-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic

About the glance: The colors indicate the state of each signal.

  • trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
  • adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
  • psar, pps, macd: green for bull mode, red for bear
  • sto: green for overbought, red for oversold, yellow for the neutral zone.

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