Liberty All-Star Growth Fund, Inc. (ASG) | Daily Alert October 15
The market’s fall pullback is starting to reverse itself, but don’t worry; there are still bargain dividend payers with high yields to be had out there.
But investing (along with everything in our lives!) has changed. You simply won’t get safe, high payouts by clutching to old habits and buying big-name, high-yielding S&P 500 stocks. The real dividend bargains are in closed-end funds (CEFs), which give you higher payouts, greater safety, and often better returns over the long haul.
The Liberty All-Star Growth Fund is full of companies that have beaten dividend darling AT&T (T) over the long haul—like Amazon.com (AMZN), Microsoft (MSFT) and Alphabet (GOOG).
Source: Liberty All-Star Growth Fund June 30, 2020, quarterly update
Plus, ASG gives you much more diversification than buying a single telecom stock: the fund boasts 121 holdings spread over a range of sectors.
ASG’s timely stock selection has helped it dominate over the last 10 years, returning 329% to the S&P 500’s 256% and AT&T’s 72%.
Brett Owens, Contrarian Outlook, BNK Invest Inc., 500 North Broadway, Suite 265, Jericho, NY 11753 USA, 516-620-4294, October 8, 2020
First Trust NASDAQ ABA Community Bank Index Fund (QABA) | Daily Alert October 26
We’ve all have been affected by the coronavirus pandemic. The major disruptions to our social lives naturally mean that our spending habits have drastically changed.
Bank of America Corp. (BAC, Rated “C”) knows a thing or two about credit card spending patterns, and according to a recent study, Americans are spending a lot more money on things like pets, education, and their homes. For example, spending on pets is up 23% over the last year to an average of $200 per month.
On the opposite end, Americans are cutting back in a big way on things like travel and entertainment, which are down 21% and 22%, respectively.
Millions of Americans are out of work and struggling, but for the fortunate ones that are still working, we’re simply shuffling our budget from one area to another. Instead of buying airplane tickets and hotel rooms, we are remodeling and furnishing our homes. Instead of eating at restaurants, we are cooking at home and funneling the savings into investments.
Americans are spending less and saving more. 53% of Americans are saving more money than usual and 51% say they will continue to save more regardless of what happens with coronavirus.
As an investor, you should be asking yourself where all those savings dollars are going: Big national banks like Bank of America Corp. and JPMorgan Chase & Co. (JMP, Rated “C”)? Or smaller regional banks? What about credit unions?
The answer is probably all three, and there are a handful of ETFs that will help you profit from the savings wave.
Megabanks have a sizable cost advantage over smaller banks. The average community bank has less than $5 million in assets per employee, while big banks can have $20 million in assets per employee. But bigger isn’t always better. That size can work against big banks because the rise in savings will only have a modest impact compared to how it can affect the profits of smaller regional or local banks.
The best banking ETF for exposure to smaller banks is the First Trust NASDAQ ABA Community Bank Index Fund (Rated “D”). Its portfolio of community banks trades for an average of 11 times earnings, 94% of book value and pays a 3%+ dividend.
Tony Sagami, Weiss Ratings, 1-877-934-7778, weissratings.com, October 17, 2020
InfraCap MLP ETF (AMZA) | Daily Alert November 5
InfraCap MLP ETF launched in October 2014, so the timing could not have been worse. The investment strategy for AMZA was to boost returns over the Alerian MLP Infrastructure Index (AMZI) by actively managing the AMZI components for investment potential.
The fund also used up to 30% leverage and sold call options to boost income. In a level to rising market, the AMZA strategy would have produced significant over-performance compared to the AMZI. In the declining MLP market from IPO until late 2019, AMZA underperformed. But if from December 2019 into January 2020, AMZA performed strongly in an upmarket.
When the pandemic hit, management was early to eliminate the leverage in AMZA. The deleveraging produced losses but kept the fund from complete liquidation. Several leveraged MLP closed-end funds went to zero value during the crash.
To stay eligible for stock exchange listing, AMZA did a ten-for-one reverse stock split. The dividend was reduced to a sustainable level, following the changes triggered by the crash. Which leads us to the present.
Currently, AMZA covers its dividend rate with distributions earned by its portfolio. The fund owns the largest, most stable MLPs tracked by the AMZI. From now on, the AMZA share price should more closely track the AMZI sector.
My thoughts and expectations are as follows: The midstream sector is stable financially and will grow nicely as we move out of the pandemic era. Companies are committed to supporting distributions, and growth plans are conservative. The current high-teens yield closely matches the yields on large MLPs. At some point, the investing public will be attracted to earning 15% to 20% and start again to buy into the midstream sector.
I don’t see any reason why the sector and the AMZA share price can’t double or more from here. Possibly a lot more. To drive average MLP yields to 6% requires a tripling of market values. Hopefully, I, along with everyone in the MLP space, have learned from the past half-decade of pain. Energy midstream provides essential services to the overall economy.
Tim Plaehn, The Dividend Hunter, yn345.isrefer.com/go/cabmdpc/cab/, November 2020
*ETFMG Alternative Harvest ETF (MJ)
“MJ” stocks have caught fire post-election.
This beaten-up ETF has reversed course now and closed last week above its 50 dma. Like the two above (and lots of other stuff, for that matter) it will open higher this morning.
But with this new industry’s second big investment wave seemingly unfolding, I think MJ has a great future.
MJ is started as a BUY; Growth investors should put 4% of your portfolio here and more Conservative accounts 3%.
Chris Temple, The National Investor, nationalinvestor.com, 224-308-2587, November 9, 2020