Why ASG's 9% Dividend Matters More Than Recession Fears in 2026

As markets navigate persistent uncertainty about economic slowdowns, investors remain fixated on recession narratives. Yet the data tells a different story—one that rewards patient capital deployment. The Liberty All-Star Growth Fund (ASG) exemplifies why this moment presents an attractive opportunity: a 9%-yielding closed-end fund trading at its steepest discount to net asset value in three years.

We’re currently able to acquire ASG and its underlying portfolio of quality U.S. equities at approximately 90 cents on the dollar. This pricing inefficiency reflects broader market anxiety, not deteriorating fundamentals. Understanding why this discount exists—and why it may not persist—forms the foundation of a compelling investment thesis.

Strong NAV Performance Counters Recession Worries

The persistent recession concerns that dominated headlines in recent years have failed to materialize. Meanwhile, the actual economic data has moved in the opposite direction. U.S. GDP expanded 4.4% in the third quarter, with the Atlanta Fed’s GDPNow indicator projecting over 5% growth for Q4. These figures substantially exceed the long-term average of approximately 3% annual growth.

This economic resilience becomes even more evident when examining stock market performance. The S&P 500 delivered 13.4% returns over the past 12 months, surpassing its 10.6% long-term annualized average. When you factor in the productivity enhancements driven by artificial intelligence’s expanding integration throughout the economy, these returns align logically with what forward-looking markets already price in.

ASG’s three-year track record reinforces this thesis. The fund has generated approximately 12% total NAV returns annually—slightly exceeding its 11.5% decade-long average. This consistent outperformance relative to broader economic cycles suggests that quality equity exposure remains rewarded by markets, regardless of recession chatter.

The 9.8% Discount Reveals Hidden Value

ASG’s current 9.8% discount to NAV represents a psychological opportunity. The fund holds a carefully curated portfolio of blue-chip U.S. equities including NVIDIA (NVDA), Microsoft (MSFT), and Apple (AAPL), complemented by domestic-focused mid-cap holdings like property management specialist FirstService (FSV) and discount retailer Ollie’s Bargain Outlet Holdings (OLLI).

Historically, such discounts tend to compress when confronted with sustained strong NAV performance. Markets eventually recognize and reward outperformance, meaning today’s markdown likely represents a temporary mispricing rather than a permanent condition. Investors who purchase at this discount position themselves to capture both the ongoing dividend stream plus potential capital appreciation when the market reprices the fund’s holdings.

Stable Payouts Despite Economic Uncertainty

A critical distinction separates ASG’s yield on market price (approximately 9%) from its yield on NAV (8.1%). This gap exists because management ties dividend payouts directly to NAV performance, targeting 8.1% annual distributions. The lower NAV-based yield makes dividend coverage significantly more sustainable—particularly important given the fund’s demonstrated ability to outperform its distribution target historically.

Over the past decade, ASG’s 11.5% annualized NAV returns have consistently exceeded its roughly 8% payout ratio. This fundamental math explains why the dividend has remained stable for three consecutive years despite typical market volatility. Management’s commitment to the NAV-based framework, while creating some quarterly fluctuation, ultimately provides greater downside protection than market-price-based formulas.

Why ASG’s Portfolio Thrives When Markets Worry

The disconnect between recession predictions and market reality reflects structural economic changes. U.S. productivity gains, substantially driven by AI implementation across industries, have lifted the economy’s potential growth rate. This productivity tailwind supports valuations for quality companies like those held within ASG.

When recession fears spike, sophisticated investors typically gravitate toward exactly the type of holdings ASG provides: established, profitable companies with sustainable cash flows. Rather than representing excessive valuation risk, ASG’s blue-chip focus positions the portfolio to weather economic uncertainty more effectively than speculative alternatives.

The 60-Paycheck Strategy for Income Seekers

For income-focused investors, ASG serves as the foundation for a broader dividend accumulation strategy. By pairing ASG’s 9% yield with complementary income-generating positions, investors can construct a portfolio delivering approximately 5 dividend payments monthly. This translates to 60 annual dividend “paychecks” rather than quarterly distributions—a meaningful difference for cash-flow dependent investors.

This approach yields approximately 9.3% across the complete portfolio, providing both more frequent income and smoothed cash receipts. The enhanced income stability helps offset any quarterly variations in ASG’s NAV-based dividend, creating predictable monthly cash distributions while maintaining exposure to long-term capital appreciation.

The Case for Patient Capital

Recession narratives capture headlines, but investment returns ultimately follow fundamental economics. As long as productivity growth remains elevated and corporate earnings support current valuations, equity-focused portfolios should continue advancing. ASG’s three-year outperformance, coupled with its widened NAV discount, suggests the market has priced in excessive pessimism.

The opportunity lies precisely at this intersection: owning quality assets at a discount, collecting a 9% distribution, and positioning for eventual multiple compression. For investors concerned about 2026’s economic trajectory, ASG’s combination of valuation appeal and income generation offers a practical response to uncertainty—one grounded in data rather than anxiety.