RE:RE:RE:I am out , good luck longsCorrection to the highlighted text in my prior post:
Successive payouts to DF can be thought of as returning an original 3.33 cents of your buy-in and adding 6.67 cents ...
TickerTwit wrote: Nothing wrong with short-term trades on DF, but the real golden goose appears when NAV clears the 15.01 hurdle by a wide margin and the payouts become regular.
The preferreds soak up the dividend and covered-call income, leaving no income for the commons, but the commons get all the capital gains attributable to the preferreds and end up with 3x leverage.
Successive payouts to DF can be thought of as returning an original 10 cents of your buy-in and adding 20 cents, which is a stunning return, but it comes with high risk (accordingly, we have less than 2% of our family's holdings in DF).
In a state of regular payout the premium on DF has historically been upwards of 30%, but over time the premium diminishes relative to the payouts. Also, unlike the premium, the payouts are immune to fluctuations in the market price of DF.
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mouserman wrote: Apparently there are still some dividend chasers who believe this is worth a buy at about a 10% premium to NAV.....UNIT NAV has jumped back up about 4 cents so far this am to $15.04...but the commons price is up 8 cents... LOL after distributions the NAV would be about 4.90 for commons.
mouserman wrote: SO with 19 of the 20 stocks in DF down today, the UNIT NAV is again right around the 15$ threshhold, and the profits on the trade are better than the .10 dsitribution i am getting.
SO at this point , with a premium getting close to 10% i will sit on some cash and buy some bargains when they appear.
Never fall in love with these splits, especially the ones close the threshhold, in a bull market that is getting overheated ....a 10% correction is not out of the realm of possibility. Especially at that time of the year when you are coming to the deadline to pay income taxes.