With a Massive Dividend to Boot
TL;DR
Buying shares of this week’s recommended fund will give you exposure to some of the most desirable stocks while receiving exceptional yield and relative safety.
The past few weeks, we focused on independence-themed personal finance moves that can help you strengthen your financial literacy and financial wellbeing.
We discussed high-yield savings accounts, short-term CDs and Treasury bills and the flexibility of money market accounts.
Today, we’re getting back to equity investments. And the fund we’re recommending has a ticker symbol making it the perfect fit for this month’s ongoing theme.
And with the Summer Olympics just around the corner, what a better time to celebrate all things America!
Icing the cake, its shares are affordable, it holds an incredible blend of top-performing, large-cap and mega-cap companies AND it pays a dividend with a ridiculously high yield.
USA! USA!
The Liberty All-Star Equity Fund (USA) was founded in 1986 is a closed-ended fund — a type of fund that issues fixed number of shares, as opposed to an open-ended fund (like a mutual fund or ETF) that allows a constant flow of new investment capital.
Worry not: There are 282,594,292 shares outstanding, so you won’t have a problem buying any.
Normally, we shy away from funds carrying higher expense ratios. But in the case of USA’s 0.93%, we won’t. That’s because (1) this is an actively managed fund, (2) its portfolio is designed for exposure to both growth and value and (3) its dividend yield offsets its expense ratio by a mile.
So far this year, the fund is up around 12%. But growth potential isn’t why we’re recommending it today.
Holdings
They speak for themselves, so we’ll just list the top holdings for your perusal:
By sector, the fund has current allocations of:
- 21.7% in tech
- 20.9% in financials
- 15.1% in healthcare
- 12.0% in consumer discretionary
- 7.9% in industrials
- 7.1% in communications
- 5.4% in consumer staples
- 5.3% in materials
- 2.1% in energy
- 1.8% in utilities
- And 0.7% in real estate
You’d have a difficult time finding a better-balanced fund anywhere. (Disclosure: We own shares of USA, so we’re biased. But these takeaways are objective.)
Safety First
In the wake of last week’s massive tech and AI stock selloff, many investors are on edge and wondering if an overinflated market is at risk of correcting.
However, the sector rotation that’s seen outflows from tech and into other parts of the S&P like healthcare, real estate, financials and energy is a GOOD sign. It’s evidence that this is becoming a broad-based bull market, rather than one being propelled by tech/AI alone.
And the Liberty All-Star Equity Fund is the perfect example of how to get exposure while still maintaining its tech holdings.
As a blended and actively managed fund, USA is currently overseen by value managers from three investment management companies and growth managers from two investment firms.
The portfolio is balanced 60/40, with 60% focused on growth and 40% on value. That’s how they’ve been able to achieve a controlled trading range with an excellent dividend.
Looking at USA’s five-year chart, it has been rangebound for years, trading within support at $5.14 and resistance at $9.20 with the sole exception being the March 2020 pandemic-induced crash:
Is this a fund that’s going to put you aboard the next rocket to the moon? No. It’s not designed for huge upside potential. It’s a yield machine for income-focused investors.
But knowing that it trades within such a well-defined range based on a basket of firmly established stocks provides a sense of security while the money you invest (or reinvest) in it continues to produce enormous yield.
About that yield …
A Whopper of a Dividend
Here’s the best part: the annualized forward dividend for USA is a whopping 12.29% paid quarterly.
That equates to 18 cents/share, which is inline with the average distribution it’s made since 2017.
The market is performing well. The economy is showing signs of ongoing strength. Nonetheless, concerns about an overinflated stock market — based largely on an AI-induced frenzy — persist.
If you’re looking for both yield and safety, the Liberty All-Star Equity Fund should be one of the first things you consider.