USA CEF: 11% Yield Growth And Value Vs. ASG 10% Yield Growth

Summary

  • USA yields 11.27%, ASG yields 10.05%.
  • We compare the 2 funds for pricing discounts, holdings, and performance.
  • Dividend coverage, recent buys/sales, and taxes are also covered.
  • Looking for a helping hand in the market? Members of Hidden Dividend Stocks Plus get exclusive ideas and guidance to navigate any climate. Learn More »

Big data Network Abstract concept

Vertigo3d/E+ via Getty Images

We've covered many closed-end funds ("CEFs") and other high yield vehicles through the years in our articles. Liberty All-Star Equity, (NYSE:USA) and its sister fund, the Liberty All-Star Growth fund, (ASG), are 2 CEFs which utilize multiple managers to focus on a variety of styles.

USA is a core equity fund which takes a multi-pronged approach to its investments, using 3 value portfolio managers and 2 growth managers with expertise in different slices of the market:

USA fund management

USA site

USA's sister closed end fund, ASG, specializes in growth equities, utilizing 3 managers, each focusing on different market cap sizes:

USA fund managers

ASG site

USA is much larger than ASG, with nearly 5X the amount of assets, at $1.9B, vs. $390M for ASG; and much higher daily volume of 1.31M, vs. 252K for ASG. Volume has slowed down recently for ASG - it was averaging 343K in February 2022. USA has 154 holdings, vs. 119 for ASG. Both funds were established in 1986.

USA vs ASG expenses

Hidden Dividend Stocks Plus

Dividends

Both funds pay variable quarterly dividends - USA's dividends are based upon 10% of its net asset value per year, payable in four quarterly installments of 2.5% of the Fund’s net asset value at the close of the NYSE on the Friday prior to each quarterly declaration date. ASG's are based upon 8% of its net asset value per year, payable in four quarterly installments of 2%.

Through 2021, both funds had strong average 5-year dividend growth, with ASG on top with 25%, and USA with 13%. However, since both of their dividends are based upon %'s of NAV, the quarterly payouts tend to shrink in down markets, and to increase in rising markets.

With the S&P down nearly 19% in 2022, both funds decreased their quarterly dividends this year - USA went from $.21 to $.20 in Q1 '22 and then to $.18 for Q2 22.

ASG went from $.17 to $.15 in Q1 '22, and then to $.14 for Q2 '22.

With its price down ~38% in 2022 to $6.39, USA yields 11.27%, while ASG yields 10.05%. They should both go ex-dividend next on ~7/22/22, with a ~9/8/22 pay date.

USA vs ASG dividends

Hidden Dividend Stocks Plus

Dividend Coverage

ASG has had a lower dividend payout ratio than USA over the past 2 years, but both funds' payout ratios rose considerably in 2021.

USA's ratio of Dividends to Realized and Net Investment Gains actually rose to over 100%, hitting ~108% in 2022, as its gains weren't enough to fully cover its distributions. However, USA also had a major ~3X uptick in Net Unrealized Appreciation, to ~$246M, vs. ~$79M in 2020.

ASG's dividend payout ratio also rose in 2022, to ~95% vs. ~61%, but its gains were enough to cover its dividends. ASG also had $9M in Net Unrealized Appreciation:

USA vs ASG fund realized gains

Hidden Dividend Stocks Plus

Taxes

USA's 2021 regular quarterly distributions ranged from $.19 to $.21, and were comprised of 68% long term capital gains, 12% Qualified and Non-Qualified Ordinary Dividends, and ~7% Return of Capital.

USA fund 2021 taxes

USA site

ASG's 2021 quarterly distributions ranged from $.16 to $.17, plus a $.52 payout, and were comprised of 49% Non-Qualified Ordinary Dividends, 48% Long Term Capital Gains, and ~3% Qualified Dividends:

USA fund distribution

ASG site

Holdings

USA: As of 3/31/22, Tech , Financials, Health Care, and Consumer Discretionary remained USA's top sectors. The top 4 were mostly stable, with Financials making the biggest move, increasing to 18.7% vs. 17.6% at 12/31/21.

USA fund sector breakdown

USA Site

ASG: As of 3/31/22, Tech, Health Care, Industrials, and Consumer Discretionary remained USA's top sectors, with very little change in their allocations in Q1 '22:

ASG fund sector breakdown

ASG site

USA's top 20 holdings comprised ~31% of its portfolio, as of 3/31/22, with several large cap, well-known names:

USA Fund Top 20 Holdings

USA site

ASG's top 20 is much more varied, with Chegg moving into the top 10, along with Progyny and Hamilton Lane:

ASG fund top 20 holdings

ASG site

Pricing

At its 5/12/22 intraday price of $6.39, USA was selling at a 2.57% premium to NAV, which compares favorably to its 1-year 4.98% average premium, but unfavorably to its 3- and 5-year discounts to NAV of -1.16% and -3.92% respectively.

ASG's 5/12/22 price of $5.57 was 3.53% above its 5/11/22 NAV/Share of $5.38, just slightly lower than its 1-year average 3.8% Premium, but higher than its 3- and 5-year average premiums of 2.8% and 1.05%.

A useful strategy when buying CEFs is to try to buy them at deeper discounts or lower premiums than their historical averages.

USA vs ASG fund pricing

Hidden Dividend Stocks Plus

Performance

With the S&P 500 down ~19% so far in 2022, as of intraday 5/12/22, it has been a rough year for the market, but an even rougher year for USA and ASG.

USA has held up better than ASG, but is still down ~ -23% in 2022, underperforming the S&P, and slightly outperforming the Financial sector.

ASG has had a much bigger downdraft in 2022, at -38%. Both funds have lagged the market and the Financial sector over the past year, quarter, and month, with ASG showing deeper pullbacks.

USA vs ASG performance

Hidden Dividend Stocks Plus

USA outperformed the Morningstar U.S. CEF U.S. Equity category on a Price and NAV basis in 2019-2021. It had a negative return in 2018, but held up better than its category in 2018; and outperformed it in 2017:

USA vs ASG price and NAV

USA site

ASG beat the U.S. Equity category in 2019-2020, but lagged it in 2021. It outperformed in 2017-2020, although it also had a negative return in 2018:

ASG Price and NAV

ASG site

Over the past 10 years, USA has had a slightly better total return and price return than ASG:

USA vs ASG returns

YCharts

Parting Thoughts

With both funds basing their dividends on a % of NAV, a down market leads to lower dividends. No one knows when the Fed will stop its rate hikes, inflation will pull back, and/or the market will bounce back, but when the bull market resumes, USA and ASG could be good bets for income investors.

Look for deeper discounts to NAV than at present, and a price near 52-week lows - right now both funds are at 52-week lows, but their NAV pricing is still more expensive than historic averages.

All tables furnished by Hidden Dividend Stocks Plus, unless otherwise noted.

Our Marketplace service, Hidden Dividend Stocks Plus, focuses on diverse, undercovered, undervalued income vehicles, and special high yield situations.

There's currently a 20% discount, and a 2-Week Free Trial on offer.

We publish exclusive articles each week with investing ideas for the HDS+ site that you won't see anywhere else.

We offer a range of income vehicles, many of which are selling below their buyout and redemption values. Find out how our portfolio continues to beat the market in 2022.

This article was written by

Double Dividend Stocks profile picture
35.24K Followers
Target 5-10% yields backed by solid earnings for better portfolio income.

Robert Hauver, MBA, was VP of Finance for an industry-leading corporation for 18 years, and publishes SA articles under the name DoubleDividendStocks. TipRanks rates DoubleDividendStocks in the Top 25 of all financial bloggers, and Seeking Alpha rates us in the Top 5 of several categories, including Dividend Ideas, Basic Materials, and Utilities. 

"Hidden Dividend Stocks Plus", a Seeking Alpha Marketplace service, which focuses on undercovered and undervalued income vehicles. HDS+ scours the world's markets to find solid income opportunities with dividend yields ranging from 5% to 10%-plus, backed by strong earnings.

Follow

Disclosure: I/we have a beneficial long position in the shares of USA, ASG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: This article was written for informational purposes only, and is not intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.