There is a clear “disconnect” happening in the US economy right now. And most investors are on Wrong Its side.
The funny thing about this is that it’s completely obvious. We hear about both sides of it in the news every day, but few people actually see it for what it is. And the 10.5% dividend we’re going to discuss today is a perfect play on this misconception.
The first part of our opportunity? Consumer sentiment, which I’m sure you’ve heard about, is very good:
Here is the university’s survey of the last 50 years. On the right side of this chart we see that the current level is the lowest level at that time.
In other words, Americans are feeling worse about the economy today than they have in a few generations, more or less. which is the place where Other The side of our separation comes to the fore: In the last year alone, Got a return of 25%.
Of course, this is good news for those of us who own stocks, but keep the stock in mind to do On average, returns of around 10% per year including dividends, so this strong gain clearly shows the value of buying in and being patient over the long term.
But the contrast between stellar stock performance and poor sentiment raises another question: Are we moving towards improvement?
This is not what we see in the data. not even close.
As you can see above, S&P 500 firms reported a year-over-year gain of 11% in Q1. This is the highest since 2022, and it is historically Very Really high.
Also note that sales growth has been accelerating over the years. This is partly due to businesses benefiting from the AI boom.
Whatever feelings each of us may have about AI, there is no denying the fact that AI buildouts are benefiting utilities, energy, infrastructure, construction, transportation, retail, and other industries. This is visible in the profits of American companies – even some of the riskiest companies out there.
In the speculative lending market, we are seeing a significant decline in default rates. Most importantly, they are falling the fastest in the debt market, which was behind the private-credit panic of late last year and early this year.
The bottom line is that American companies are doing well overall. But where does that leave everyday Americans?
Despite their gloomy mood, American households have remained largely financially healthy throughout this decade. As we can see above, they are less likely to default on their loans than in 2010.
Defaults had been on a rising trend earlier this decade as pandemic-relief efforts from the Fed and the U.S. Treasury waned. But there has been a sharp decline in defaults since the beginning of 2025. This shows that the financial health of Americans is improving. Part of this may be due to increased opportunities due to the aforementioned AI buildout.
Finally, the chart above shows inflation-adjusted income for workers. Note that from 1980 to 2015, wages didn’t actually grow at all. Then in late 2010 they started gaining ground and have been growing ever since.
What’s interesting is that Americans generally started making more money in the late 2010s, when sentiment began to decline. This trend continues today, leading to a strange situation: people are generally getting richer – and they are not happy about it!
It’s certainly a strange situation, and it sets the stage for huge jumps and huge drops in stocks as rising earnings and poor sentiment compete. We saw a decline about a year ago, when the Liberation Day tariffs were announced, and again this year, due to the Iran conflict (and if you go further back, a deep selloff in 2022 on inflation concerns).
All those moments were buying opportunities, and I firmly believe the same will be true for any future shortfalls.
This 10.5% Dividend Is a Smart Play on the Earnings/Sentiment Mash-up
This is what is called a closed-end fund (CEF) Liberty All-Star Equity Fund (NYSE:) Comes. It’s a 10.5%-yielder that holds large-cap S&P 500 stocks.
Its top holdings are , , , , Capital One Financial (NYSE:), , Visa (NYSE:) And Wells Fargo (NYSE:).
And because USAA is a CEF, we can access its holdings at a discount to net asset value (NAV, or the value of the fund’s underlying portfolio). This is a deal that does not exist with ETFs.
This is particularly timely in the case of the United States as the funds’ already steep discount means we don’t have to wait to buy the dips here: the United States is already trading at an 11.3% discount, which is well below its average of 7.5% over the past year and well below its average of 0.7% over the past five years.
It is difficult to track such deals in such an emerging market.
But the most exciting part is the 10.5% dividend that USA generates by taking the returns on its holdings and “converting” them into an income stream for us. It is committed to increasing dividends by linking them to its NAV and paying out around 10% of NAV as dividends every year.
He does This means the quarterly payouts are a little lower, but we’re okay with that, because the result has been a fairly consistent dividend over the last three years:
Source: income calendar
And then there’s the fund’s overall performance, which has been strong:
USA offers a stable long-term return
USA has delivered a 12.3% annual total return over the last decade, and has continued to do so, thanks to that strong portfolio.
And since the fund pays out most of its value gains as dividends, you can reinvest in the USA and further grow your income (and portfolio value). Or you can withdraw your dividends and use them to finance your lifestyle, as many retirees do.
The choice is yours, and strong CEFs with proven track records like USAA make that flexibility possible.
Disclosure: Brett Owens and Michael Foster are contrarian income investors who look for undervalued stocks/funds in the US markets. Click here to learn how to profit from their strategies in the latest report.7 Best Dividend Growth Stocks for a Secure Retirement“