Liberty All-Star Growth Fund Offers Investors 9% Quarterly Distribution Boost (ASG)
By: Ned Piplovic,
The Liberty All-Star Growth Fund, Inc. (NYSE: ASG) is going to hike its quarterly dividend payout 9% for the upcoming distribution in mid-September.
This dividend hike will be a nice accompaniment to the stock price increase of more than 30% since July 2017, and the near doubling of shareholder investment over the last five years. The impressive growth can be largely attributed to the continuing strength and long-term trends of some of the fund’s most represented sectors — Information Technology and Health Care.
Although the next dividend won’t be distributed until September 10, 2018, the ex-dividend date is coming up on July 26, so investors wishing to benefit from the 9% increase should conduct their due diligence and take a position in the next week or so.
Liberty All-Star Growth Fund, Inc. (NYSE:ASG)
The Liberty All-Star Growth Fund is a multi-managed fund that allocates its portfolio assets on an approximately equal basis among several independent investment organizations, each with different investment styles and strategies Weatherbie Capital, LLC handles small-cap investments, Congress Asset Management Company, LLP manages mid-cap investments and Sustainable Growth Advisers, LP is called upon for large-cap investments. The main advantages of this multi-management investment approach are a reduction of risk through diversification and potential for more consistent returns over extended time horizons.
Liberty’s current distribution policy is to pay on its common shares at approximately 8% of its net asset value per year. These payments are made in four quarterly installments of 2% of the Fund’s net asset value as of the close of the New York Stock Exchange on the Friday prior to each quarterly declaration date. Should the total distributions made under the policy exceed the Fund’s net investment income and net realized capital gains in any calendar year, the excess is generally treated as a non-taxable return of capital.
As of May 31, 2018, Liberty had nearly $160 million in total net assets, with 99.7% of those assets invested in equities. The top sectors — Information Technology, 31% of total assets; Consumer Discretionary, 22.5%; Health Care, 16.1%; and Industrials, 13.2% — make up more than 80% of the fund’s total asset allocation. Individual equity allocation was more balanced, with just four equities accounting for 2% or more of the fund’s total assets — Chegg, Inc. (NYSE:CHGG), 2.1%; Wayfair, Inc. (NYSE:W), 2.1%; XPO Logistics, Inc. (NYSE:XPO), 2.0%; and Insulet Corporation (NASDAQ:PODD), 2.0%.
Over the past eight consecutive years, the quarterly distribution amount has doubled from $0.06 to $0.12 per share, which corresponds to an average growth rate of 9.1% per year. The upcoming quarterly distribution of $0.12 will be 9.1% higher than the previous period’s $0.11 payout and will translate to a 7.2% dividend yield at current prices.
While 7.2% may sound like a really good yield, it is actually more than 20% below the fund’s average yield of 9% over the past five years. This is because ASG’s share price grew at a faster pace than the quarterly distribution. Even so, the fund’s current yield is in line with the 7.36% average yield of the Closed-End Equity Funds segment and is 135% higher than the 3.05% average yield of the entire Financials sector.
Since 2016, ASG has been in a significant uptrend with some moderate short-term bouts of volatility. After a 4.6% drop during the first month of the trailing 12-month period, the share price closed on August 10, 2017 at its 52-week low of $4.81. Subsequently, the share price embarked on an uptrend and rose more than 40% before reaching its 52-week high of $6.77 on July 13, 2018. Its closing price as of July 16 was $6.69, marking a 1.2% pullback from the 52-week high. This closing price was 37.2% higher than it was 12 months earlier, more than 39% above the 52-week low from August 2018 and 41% higher than it was five years ago.
Altogether, dividend income and an impressive performance for a small stock gave shareholders a 43.8% total return in the last 12 months and a total return of more than 58% over the past three years.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.