My prediction for 2026? Strange as it may sound, given the wild headlines we’re seeing pretty much daily, I’m calling for more of the same.
As I said a couple weeks ago, I expect around 12% returns from the S&P 500 this year.
That’s why we’ve been adding to the equity CEFs in the portfolio of our CEF Insider service. Today I want to talk about one of our holdings, in particular: a 9%-payer called the Liberty All-Star Growth Fund (ASG).
We’re zeroing in on this one because its discount to net asset value (NAV, or the value of its underlying portfolio) is the biggest it’s been in three years. As a result, we can buy ASG, and its portfolio of US blue chips, for around 90 cents on the dollar. That markdown helps reduce any worries around valuation as the market keeps rising higher.
Bubble Worries Are a Plus for Us (and This 9%-Paying Fund)
Remember that recession we were told had a 100% chance of happening back in 2022? Well, we’re still waiting for it.
Meantime, US GDP rose 4.4% at the last reading for the third quarter, and our most up-to-date estimate, the Atlanta Fed’s GDPNow indicator is showing over 5% growth for Q4. These are strong numbers, especially with average annual growth around 3%.
Then there’s AI, which continues to spread through the economy, boosting productivity as it does. When you account for the AI effect, the 13.4% return the S&P 500 has put up over the last 12 months (versus its long-term average of 10.6% annualized) makes sense. The market is simply telling us that it’s pricing in a bit of extra juice from this new tech.
So we’re going to go ahead and let the mainstream crowd fret. The truth is, the numbers don’t support the idea of a bubble right now.
That’s one reason for the 9.8% discount on ASG, which sports a high-quality portfolio of US blue chips like NVIDIA (NVDA), Microsoft (MSFT) and Apple (AAPL), as well as domestic-focused midcaps like property manager FirstService (FSV) and Pennsylvania retailer Ollie’s Bargain Outlet Holdings (OLLI).
ASG Drops Into the Bargain Bin
That 9.8% discount makes ASG particularly compelling when you consider that its NAV has gained 11.5% annualized over the last decade.
Something else many CEF investors don’t realize is that a discount like this helps keep a fund’s dividend stable. That’s because, when you calculate ASG’s yearly payout based on NAV, not the discounted market price, you get 8.1%. This is significantly below ASG’s yield on market price and an easier figure for management to cover.
That said, the point is pretty much moot when you consider that the fund’s 11.5% annualized NAV return over the last 10 years means it has been out-earning that payout for a long time.
Now, we do need to bear in mind that ASG’s management ties its dividend to NAV, with the stated goal of paying 8% of NAV as dividends a year, so the payout does float around some. But given ASG’s strong NAV performance, the dividend has been pretty stable for the last three years.
Steady Payouts at a Healthy Discount
Source: Income Calendar
But all that said, there is a question we need to ask: After three years of the discount getting steeper, should we worry it will never go back to where it used to be?
To answer that, we need to look at where ASG’s total NAV return has gone in that three-year span. And it’s been nowhere but up:
ASG’s Short-Term Performance: Strong
Over the last three years, ASG has delivered about a 12% total NAV return, a bit above the 11.5% it’s posted over the last decade. Over the long haul, discounts like this tend to narrow in the face of such persistent strong gains.
That makes this discount a sign that ASG is ripe for buying: The market will eventually reward this strong performance (and dividend). But if we buy today, we’ll get in at a discount before that happens.
Buy ASG—Then Grab 60 More Dividend “Paychecks” By Doing This
My “60-Paycheck Dividend Plan” builds on BTO’s 9% payout by handing you 5 dividend checks a month, on average. That, as the name of my “Dividend Plan” says, is a total of 60 dividend payouts in the next year (and every year after that!).
Your average yield? A whopping 9.3%.
That not only gives you payouts every month (instead of every quarter) but smooths out ASG’s “fixed-to-NAV” dividend, which can sometimes vary.
Kickstarting this silky-smooth 5-dividend-a-month payout plan couldn’t be simpler. Simply click here and I’ll spell it all out for you in detail. You’ll collect the first of your 60 dividend “paychecks” in just a few weeks!