Dividend Dreams

Recently, two CEFs (AOD & AGD) from Alpine were forced to cut dividends by a large margin. Those of you counting on the income may be somewhat shaken by the news, but I think it will be for the best. The methods they use for income revolve around rotating holdings based on dividend payments. With recent cuts or reductions by the companies they hold they were forced to employ some leverage and churn holdings at a rate of nearly 650% annually. I think that with the reductions they will churn less and reduce leverage. I believe that the end result will be a full recovery of these CEFs over the next year or so as the general economy worldwide improves. I would expect the monthly payouts to remain the same into the 2nd quarter of 2011 and then get a slight increase.

The third Alpine CEF, AWP, reduced dividends a while back and has been doing fairly well since. It has also raised its dividend once since the initial cut. Not too bad for a fund that is essentially a REIT.

Also keep in mind that all three pay out any unpaid income at the end of the year.

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This fund is mostly focused on Australia and South Korea followed by the Philippines and Hong Kong. It is 65% invested in corporate bonds followed by 29% government bonds and has an average rating of A+. They also make use of roughly 25% leverage which isn’t a bad thing considering they are using cheap money to buy better paying bonds.

Here are some of the relevant stats:

Yield: 6% paid monthly (currently $.035/share)
Cap: 1.74B
Volume: 800k
Fees: 1.37%
Beta: 0.74
Cost: 6.55 (selling at a 2.5% discount to NAV)

If you need a little Asian coverage with the stability of Australia as well then this may be a fund to research further.

Education Realty Trust, Inc. is a self-administered, self-managed real estate investment trust that owns, develops and manages high-quality student housing communities throughout the United States. Led by a team with over 200 years of shared industry experience, EDR is one of America’s largest owners and operators of collegiate student housing. The Company has ownership and management interests in 65 properties with 38,143 beds in a total of 21 states. Here are the stats:

Yield: 4%+ (after recent cut, so it’s likely safe)
Size: $275 million
Volume: 450,000
Beta: 1.5
Owned: 86% institutional

This fund has an obvious focus on the Utility sector. It has 35 stock holdings with exposure to both regulated and unregulated markets. It also has more volume, lower fees, higher yield and far more in assets than a similar fund from Vanguard (VPU). While everything has a risk, utilities have long been considered a nice defensive sector to hold in down times. They can also make for a nice, stable holding in less crazy times as well. Here are some of the stats:

Yield: 4%+ paid quarterly
Fees:  0.21%
Holdings: Exelon, Southern Company, Dominion Resources, FPL Group, Duke Energy, PG&E

I have a problem with too much money. I can’t reinvest it fast enough, and because I reinvest it, more money comes in. Yes, the rich do get richer. – Robert Kiyosaki

AWF is an Emerging Markets Bond fund.  It brings in some nice income from a potentially volatile market. Here are some of the relevant stats:

Holdings – 458, average is BB
Volume – 125k+ average
Yield – over 7.5% with monthly dividends
Fees – 1.01%
Trading at discount of over 4%
Countries – Turkey, Brazil, Phillipines, etc.

A worthy addition to your holdings if you have a place for this type.

PGX – PowerShares Preferred Portfolio

This fund holds preferred shares of a number of companies, mostly financial as of this posting.

Yield of over 7% and paid out monthly
Trading at a very slight premium
Fees of 0.5%
Around 75% U.S., 25% Foriegn

If you believe that the financial industry will make a comeback in the next couple years
this may be a good fund to have in your portfolio.

What do you think?

CIK is a nice bond fund with the following stats:

- Yield above 10% & dividends payed out monthly
- Fees of .73%
- Trading at a slight discount
- Historical return of over 5% since inception 20+ years ago
- Morningstar rated as 5 stars
- Over 300 holdings & enough volume to get in/out when you want

It does hold almost exclusively lower-grade bonds so be sure to check it against your risk tolerance and let me know what you think about it.

This Closed-End Fund is one of my favorites. It is one of three funds offered by Alpine. It is basically a basket of stocks containing companies related to real estate owners, developers and investors. It offers both U.S. and Non-U.S. coverage and is not leveraged  more than 5%.

Dividends are monthly and come only from earned income, not return of capital. This is very important and separates this fund from many others. They reduced the dividend a while back, but the yield is still over 5.5%. I think the new dividend is safe and should rise when the economy recovers. Any income not paid out during the year is dispersed at year-end.

Despite recent gains it is still trading at quite a discount to NAV. If you have any belief that the real estate market will recover I think this is a great fund and a good time to  jump in. Alpine management has been buying shares and insider buying can be a good indicator of their faith in the fund.