Suppose someone provided you with an investment idea that delivers a 9.3% dividend yield and posted an annual return of +23% last year? "Sounds too good to be true" or "What's the catch?" you might say. Those were our first thoughts, too. However, after careful scrutiny, we now believe The Alpine Dynamic Dividend Fund (ADVDX, $12.85) would be a welcome addition to any income-oriented portfolio.

When making investing decisions, the fund's managers look for income first, capital gains second. Alpine invests in domestic or foreign stocks with dividends that qualify for the reduced 15% tax rate. Top among the fund's 90 holdings are high-yielding oil tankers Tsakos Energy (TNP, 3.8% yield) and Frontline (FRO, 22.1% yield), telecom firm Citizens (CZN, 7.4% yield), and movie theatre giant Regal Entertainment (RGC, 6.1% yield).

The downside to companies that pay big dividends is often slow growth. To address that issue, the fund invests in stocks with not only solid dividend yields, but also excellent growth potential. Stocks like Citigroup (C, 3.6% yield), Abbott Labs (ABT, 2.3% yield) and General Electric (GE, 2.4% yield) fit that bill.

As you can see, the fund holds stocks in a wide variety of industries, ranging from energy and telecom to consumer staples and healthcare. This diverse portfolio helps ensure more stable returns. After all, if one industry or company moves out of favor, then another is likely to pick up the slack.

Adding some sizzle -- as well as some risk -- Alpine also invests about one-third of its assets in higher risk/higher reward turnaround stocks. These holdings tend to boast above-average yields and capital appreciation potential. Dow Chemical (DOW, 2.7% yield) and Lyondell Chemical (LYO, 3.0% yield) were last year's turnaround success stories. This year, the fund is betting on Basset Furniture (BSET, 4.4% yield), Russ Berrie (RUS, 5.1% yield) and General Motors (GM, 5.5% yield). 

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Although the fund charges an average expense ratio of 1.35%, it changes its portfolio picks at an above-average rate. That large turnover increases trading costs and can trigger additional capital gains taxes. Nonetheless, Alpine's total return last year of +23% (including share price gains and the fund's $1.18 dividend payment) was far superior to that of similar dividend funds and more than double the S&P 500's total returns. And looking at more recent data, ADVDX has maintained that stellar outperformance in 2005 as well.

As investors continue to move into high-yielding dividend stocks throughout 2005 and in the years that follow, this fund should be a prime beneficiary. ADVDX remains one of our top picks for income-oriented investors.

Important Note: The above article was merely a small excerpt from a recent News Flash we sent to subscribers of our premium, income-oriented investing newsletter -- High-Yield Investing. In each issue of that newsletter, editor Carla Pasternak delivers a host of other investing ideas and tips designed to help you earn steady gains and above-average income from your portfolio. To receive your copy of our most recent High-Yield Investing newsletter, as well as other guidance similar to this every month, you'll need to register for this separate publication. Please visit one of the following links to continue...

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