It would appear that all the bad news, which nearly all has to...

It would appear that all the bad news, which nearly all has to do with the USD - $A would be factored into the stock?

RAT announced on 31 October that it's 100% income currency hedged for the next 4-7 years.

ie. The dividend is to hold up at its current fully tax deferred amount of 11.36c a year.

Even if in 5 years time, currency hedging resulted in a 20% drop in the dividend ie. (11.36c - 2.272c), this would result in a dividend of 9.088c.

With RAT trading around 90c-92c of late, that's still a 10% fully tax deferred dividend with a 20% cut in the dividend yield (at 9.088c for example).

My thinking is there's been some over-reaction to the appreciating Australian $ so much so that the panic sellers haven't really done their sums.

If you hold from today until 5 years time when for arguments sake and the 1$A = 1USD (the dividend is reduced by say 20% because of hedging unwinds) RAT up until that time will give you 5 years worth of tax deferred dividends = 56.8c

So in 5 years time buying at today's price of 90c, in order for you to have "lost" money, RAT unit price would have to be less than 90c - 56.8c = 33.2c

Looking forward 5 years, the dividend is cut by 20%, leaving a yearly distribution of 9.088c, if the unit price actually fell to 33.2c a year (the point where over a 5 year period you would 'lose' money), the yield would be an astronomical 27%.

ie. no-way the unit price would drop so low, and hence you would be in front.

So from a longer term perspective, I don't see how you can really "lose" money on this stock.

The only thing you could really "lose" would be the possibility of greater returns elsewhere in the market (which in themselves are nearly all inherently higher risk than RAT).

Thoughts? Opinions? Friend or foe alike :)