Beware Of The Dividend Illusion (AGD, ETY, AOD, EOD, AWP, FAV)

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November 1, 2010 12:26pm NYSE:AGD NYSE:AOD

Dividend-capture funds aren’t the place to look for yield, says closed-end fund strategist Mike Taggart. Mike says, “I’m not the biggest efficient market hypothesis person. But if a stock is trading at $10, and it pays out a $1 in dividends, typically what happens is


the next day the market adjusts for that, and the stock will open at $9 a share, because that $1 is gone. And that’s kind of what is left unsaid in the annual reports of these seven funds that do this. So what they are doing is, I mean I call it, they are laundering investors capital. They are taking investors’ capital, they are laundering it through dividends, and then they are paying out the dividend, but the net asset value of the fund actually falls because, like I said, like just invested in a stock that was $10, today is $9; they pass on that dollar, and there is less capital left in the fund.”

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Securities mentioned in this video: Alpine Global Dynamic Dividend Fund (NYSE:AGD), Eaton Vance Tax-Managed Diversified Equity Income Fund (NYSE:ETY), Alpine Total Dynamic Dividend Fund (NYSE:AOD), Wells Fargo Advantage Global Div (NYSE:EOD), Alpine Global Premier Propertie (NYSE:AWP), First Trust Active Dividend Inc (NYSE:FAV).


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