Thursday, July 22, 2010

AOD Watch

Alpine Total Dynamic Dividend Fund (AOD), the once -- and future? -- primo dividend play, is showing a bull signal on the parabolic sar, after a bearish streak that followed the company's decision to slash it's dividend big-time.
AOD $5.38

The signal, however, is ghosting -- appearing and disappearing -- so there's no guarantee that it will persist at the close. I'll analyze as though the signal persists, and will follow with a status at the close and tomorrow. Often, ghosting today is followed by persistence tomorrow.

AOD once upon a time had a dividend yield of 20%+ a year. When the dividend was slashed last month, a bit too late in the game for my taste, the effective yield moved down to around 12% plus change.

That put the yield on a par with such all-U.S. offerings as JNK or NLY. Since AOD has huge foreign exposure, the current level makes little sense in terms of compensation for risk. It's like, "I'll pay you $12 to sit and watch TV, or $12 to cross the freeway blind-folded during rush hour. You choose." Just silly.

AOD, like many dividend plays, to toward sideways trading unless there's an expectation that the dividend yield will change. Then the moves are violent.

This fund dropped 36% from the pre-announcement high to the post announcement low, and since then has recovered 11% of the decline.

The AOD announcement set the current lower rate for three months, through September, at a 5.5¢ per share each month, compared to 12¢ monthly dividend before the cut. Presumably, in September the company will revisit the dividend level.

The most recent post-announcement bull phase carried the price up 5.5%, a decent capital gain.

On the Person's chart, AOD is trading below the $5.79 pivot midline, with tons of room for fluctuation between the upper and lower pivots.

Person's Table
ppspps openupper pivotlower pivot
AOD $5.38 $5.32 jul22 $6.75 $3.03

But for AOD, it's all about the dividend expectations. I would argue that bullish signs at this point mean accumulation in the expectation that the company would raise its dividend again in the fall.

The cut came after the portfolio was savaged a bit by the eurozone debt crisis. That problem, although still severe, is on its way to being solved. And it is in AOD's interest to have a competitive -- read "high" -- dividend rate. So I would expect more tentatitive bullishness to come.

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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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