Initially I wanted a position in TNH or a similar high dividend equity since at the time the markets where teetering between the possibility of breaking out, and rallying significantly, or breaking down, and selling off as part of a moderate correction. Either way, I wanted a position that would allow me to participate in the rally, and would also provide me ( capital preservation ) downside protection -support from the dividend- if the market was to correct. I didn’t want to guess as to where the market was heading over the next month, I just wanted to position myself no matter what direction it did go. I have been a long time follower of TNH and have noticed in the past that as the dividend approached the 10% levels, the buyers showed up, and short term bottoms in the equity price where form. Having said that, my profit goal does not included dividend payments, and is based purely on expected equity gains.
Since the position was initiated on June 22, TNH has successfully defend the support level provided by it hefty dividend. Despite the market sell off we saw prior to this past week rally, TNH had perform as expected. Going forward I expect the reflation trade in commodities to get some legs, and therefore my price target of $112 is very much in target in the near to medium term.