It’s hard to believe, but there actually is a 10% dividend sitting right under investors’ noses—even now, when the typical S&P 500 stock dribbles out a pathetic 1.3% payout.
That 10% payer is a closed-end fund (CEF) called the Liberty All-Star Equity Fund (USA). We’re going to put this fund in the spotlight today, so we can see how it offers such a large dividend in these income-lean times, and whether it may be for you.
Let’s start with performance: USA has delivered a total return far larger than that of the market in the last five- and 10-year spans (as well as in the last three years, one year and for 2021 so far). That’s just not something conventional “wisdom” says it’s possible—most actively managed funds, the thinking goes, underperform. But here we are:
Actively Managed CEF Crushes the ETF
The best part of this track record is that, thanks to USA’s huge dividend, most of this gain was in cash. And speaking of dividends, here’s something else most people think is impossible with a payout this big: not only has USA sustained its payout over the long run, it’s actually increased it by a whopping 75% in the last five years, thanks in large part to a generous dividend policy where USA hands over 10% of its NAV as payouts.
Big Yields and Big Pay Hikes in 1 Buy
Aside from USA’s impressive history, there are three other reasons why now is a good time to give this CEF strong consideration.
Reason #1: The US Economy Is Cranking Out Jobs
As the ticker suggests, USA specializes in American companies, and that means it will rise with a strong domestic economy. And that’s exactly what we have right now.
Jobs Recovery at Full Throttle
July saw the best jobs data we’ve probably ever seen, at least in our lifetimes, with nearly a million new jobs added in a month, plus upward revisions in May and June, with the rate of jobs growth accelerating.
We’re not at pre-pandemic levels yet, but we are getting there, and companies desperate to hire are giving workers more pay and more incentives to work. That, in turn, boosts consumer spending and corporate sales and profits. And as we’ll see in a moment, the companies best positioned to absorb that higher spending are the very ones inhabiting USA’s portfolio.
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