mlk_man
04-19-2006, 06:22 AM
A Turbo-Charged Dividend Strategy
Jill K. Evans
Alpine Dynamic Dividend Fund
http://www.bottomlinesecrets.com/images/drop_caps/blue_m.gif ost top dividend-paying mutual funds follow buy-and-hold strategies. Not Alpine Dynamic Dividend Fund. A portion of its portfolio is actively managed to maximize tax-advantaged dividend income. Manager Jill K. Evans and associate portfolio manager Kevin Shacknofsky buy dividend-producing stocks and sell them after the next quarterly dividend distribution. That "dividend capture" strategy makes for a very high turnover rate -- meaning lots of trading. But the fund makes sure to hold each stock for at least 61 days to qualify for the favorable 15% federal income tax rate on qualified stock dividends. Result? The fund recently yielded 12.5% -- more than twice that of the second-highest yielding fund in its category. And that's without owning shares of real estate investment trusts (REITs), for which dividend payouts aren't eligible for the favorable tax rate.
The remainder of Alpine's portfolio is divided among long-term holdings -- turnaround situations as well as companies with strong earnings growth and cash flow, high insider ownership and management that believes in returning cash to shareholders. Two recent long-term purchases...
Meridian Bioscience (VIVO): This Cincinnati-based company pays almost a 2% yield -- unusual for a biotech stock. The company received FDA approval on March 16, 2006, for an ulcer test that can detect ulcer-causing bacteria before ulcers flare up. It also makes disposable test kits for rapid diagnosis of infectious diseases and produces proteins and enzymes that are used by biopharmaceutical companies and government agencies to develop drugs and vaccines. It is working on anti-bioterrorism initiatives for the Department of Homeland Security. Top management holds a substantial stake and is committed to paying out 75% of profits as dividends. Recent share price: $26.92.
TXU Corp. (TXU): This Texas utility has been restructuring and may spin off its regulated electricity transmission business, which could unlock a lot of hidden value. It operates in one of the country's highest growth areas -- Dallas-Fort Worth -- and just purchased long-term futures contracts to hedge against the risk of falling natural-gas prices. This stock is a value play, trading at a price-to-earnings (P/E) ratio of nine times its estimated 2006 earnings, with a 3.5% dividend yield. Recent share price: $44.95.
Jill K. Evans
Alpine Dynamic Dividend Fund
http://www.bottomlinesecrets.com/images/drop_caps/blue_m.gif ost top dividend-paying mutual funds follow buy-and-hold strategies. Not Alpine Dynamic Dividend Fund. A portion of its portfolio is actively managed to maximize tax-advantaged dividend income. Manager Jill K. Evans and associate portfolio manager Kevin Shacknofsky buy dividend-producing stocks and sell them after the next quarterly dividend distribution. That "dividend capture" strategy makes for a very high turnover rate -- meaning lots of trading. But the fund makes sure to hold each stock for at least 61 days to qualify for the favorable 15% federal income tax rate on qualified stock dividends. Result? The fund recently yielded 12.5% -- more than twice that of the second-highest yielding fund in its category. And that's without owning shares of real estate investment trusts (REITs), for which dividend payouts aren't eligible for the favorable tax rate.
The remainder of Alpine's portfolio is divided among long-term holdings -- turnaround situations as well as companies with strong earnings growth and cash flow, high insider ownership and management that believes in returning cash to shareholders. Two recent long-term purchases...
Meridian Bioscience (VIVO): This Cincinnati-based company pays almost a 2% yield -- unusual for a biotech stock. The company received FDA approval on March 16, 2006, for an ulcer test that can detect ulcer-causing bacteria before ulcers flare up. It also makes disposable test kits for rapid diagnosis of infectious diseases and produces proteins and enzymes that are used by biopharmaceutical companies and government agencies to develop drugs and vaccines. It is working on anti-bioterrorism initiatives for the Department of Homeland Security. Top management holds a substantial stake and is committed to paying out 75% of profits as dividends. Recent share price: $26.92.
TXU Corp. (TXU): This Texas utility has been restructuring and may spin off its regulated electricity transmission business, which could unlock a lot of hidden value. It operates in one of the country's highest growth areas -- Dallas-Fort Worth -- and just purchased long-term futures contracts to hedge against the risk of falling natural-gas prices. This stock is a value play, trading at a price-to-earnings (P/E) ratio of nine times its estimated 2006 earnings, with a 3.5% dividend yield. Recent share price: $44.95.