RE: RE: ConfusedSome good points. We have both been in this stock a long time
The mystery is the disconnect between the holdings and FFN’s share price. I am not surprised that people would take a speculative bet on a 21% yield (though this is not a 21% yield). What is surprising is that since the 2nd dividend was missed the holdings have decreased further and FFN’s share price has simultaneously gone higher. This is what is confusing.
21% yield sounds great on the surface. BUT, to get that return the NAV has to exceed $15.00 and stay there for 12 consecutive months. I do not believe this will be the case over the next 12 months. The speculators as you say will probably take the other side of this bet. However look back over the last 12 months between June 2010 and May 2011, the dividend has been paid 5 times....4 times out of 12 if it misses next month. So it’s actually yielding somewhere between 7- 9% on today’s price which is not all that great particularly given the US outlook going forward (ie QE2 ending, US debt concerns, inflation, rising rates, weak housing market, oil etc).
As you said, Investor buying at this time are looking long term and are not trying to 'time the market'. which may be true. Though even if you expect a 9% dividend over the next 12 months buy and hold is still a less than optimal strategy. The risk is that the NAV hovers at or below $15 and never breaks out, or worse it continues to decline as QE2 ends in June. To see what FFN will look like without a dividend just look back to last June when the price hit $6.40 as people were speculating the dividend would be reinstated. Instead the NAV continued to decline and so did the stock all the way down to $3.81 in October. That is the risk with buy and hold. You may eventually get 9% in dividends over the year but you may have to take a 50% hit to your capital at some point throughout the year to get it, and how many of these buy and hold investors will ride it out? Most will likely get stopped out somewhere along the way down and won’t know when or how to get back in. Buy high sell low.
Hopefully the fundamental problems magically fix themselves, the world turns around and FFN blows past $15 and we all make lots of money. But somehow I doubt this will happen.
Good luck to all the longs.