Author: Dan Plettner
Disclaimer: Dan shorts ( AOD ) in his Covestor Long/Short Opportunistic Model.
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On August 19th at 2:16 EST, I reopened a short position in Alpine Total Dynamic Dividend Fund (AOD) at 5.44. There are more than 220 million shares outstanding. I do not believe there will be nearly sufficient market demand for AOD’s strategy of buying dividends to maintain a market value near Net Asset Value (“NAV”). I think demand for AOD shares could be exacerbated if the Bush Tax Cuts expire at year end.
I believe AOD’s yield continues to be demonstrative of its financial engineering.
AOD recently cut its distribution, but even to meet the lower distribution rate it seems Alpine must buy dividends at such a pace for AOD that I think requires sacrificing any growth objective. In effect, I think AOD looks to be slowly liquidating itself in a manner that distributes the tax liability associated with buying dividends to shareholders.
I continue to observe Alpine Trustees’ Governance Tendencies when studying the Governance interests. If insufficient demand for Alpine’s strategy of buying dividends adversely affects the market valuation, I believe the AOD shares would trade at a discount larger than 20% without Alpine taking action.
