Published: August 18, 2008

Launched by Alpine Funds two years ago, Alpine Global Dividend (NYSE: AGD, $13.21) has already made a name for itself among income investors.

Lead manager Jill Evans and her team begin with a rigorous top-down approach, meaning they evaluate the larger macroeconomic picture to identify trends and pinpoint the most promising industries. From there, they go on a company-by-company search to find the most attractive stocks in those groups, relying heavily on strong management, superior returns on capital and long-term growth potential.

Above all, the overriding goal is to generate maximum current income from dividend-paying stocks -- preferably those qualifying for favorable tax treatment.

Evans isn't afraid to search off the beaten path for dividends, and that is reflected in a portfolio composition that differs markedly from most in this category. Whereas many equity-income funds hold a 50% or greater slug of financial stocks, this fund devotes less than 20% to the financial sector -- diving instead into industrial, energy, telecom and consumer-oriented stocks.

It's also worth noting that the portfolio gravitates heavily toward higher-yielding markets like Sweden, Finland, Norway, Italy and the United Kingdom. Western Europe, which accounts for about 60% of the fund's $520 million in assets, carries an average yield of nearly 5.0% -- more than double the amount offered by U.S. firms.

In the end, however, the portfolio is the end result of a unique three-pronged attack.

First, there is the core mission of seeking out undervalued high-yield companies with identifiable turnaround catalysts. Next, management will also dabble in the occasional growth stock with the potential for both dividend hikes and significant capital appreciation.

For example, while Diamond Offshore Drilling (NYSE: DO) doesn't have a current yield that jumps off the page, the driller is producing copious cash flows and boosting its distributions. More importantly, the shares spiked +90% last year -- and AGD has it as one of its largest holdings.

Finally, the managers also employ a dividend capture strategy, which involves precise timing to rotate in and out of companies about to pay a dividend to "capture" more than the standard four quarterly payouts per year with the same investment dollars. Not long ago, Evans swooped in just in time to catch a 15% special dividend distribution from Italian life-insurance giant Unipol Gruppo before moving on to another high-yielder.

AGD shareholders are currently enjoying steady monthly payments of $0.17 per share, for a hefty yield of 15.4%. And don't be fooled by others; AGD is able to make those payments without the aid of leverage or options. The fund also distributed $1.47 per share in capital gains at the end of last year.

Very few funds tout rich yields in excess of 15%, and fewer still can make those payments without turning to leverage or other creative strategies. Of course, an ETF's yield is only as good as the portfolio behind it, and AGD's core holding of undervalued companies with clean balance sheets and visible growth catalysts is appealing.

It's a safe bet that Evans and her team have sprung into action to capitalize on the attractive valuations and higher yields this global sell-off has created, so I expect to see significantly stronger performance over the next year or two.

Nathan Slaughter
Editor
The ETF Authority

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Nathan Slaughter has developed a long and successful track record over the years by investing in both exchange-traded funds (ETFs) and deeply discounted value securities. When it comes to ETFs, Nathan has created a proprietary ranking system that helps him zero in on today's most promising funds.

Nathan's previous experience includes a long tenure at AXA/Equitable Advisors, where he provided comprehensive investment advisory services to small businesses and high net-worth clients. He also honed his research skills at Morgan Keegan, where he performed asset allocation, retirement planning, and consultative portfolio management services.

Several years ago Nathan switched gears and decided to devote his time exclusively to financial analysis and writing. He has since published hundreds of articles for a variety of prominent online and print publications, and he now writes exclusively for StreetAuthority.com.

Nathan's educational background includes NASD series 6, 7, 63, & 65 certifications, as well as a degree in Finance/Investment Management. He currently resides in Shreveport, LA with wife Julie and sons Aidan and Riley. 

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