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How One Yield Chaser Wins the Race


What's it like managing a dividend income fund these days? Not bad at all.


Michael Liss is putting money to work in oil, banks, and tissue paper. As an investor, if you think that all sounds sort of boring, he doesn't mind at all.

"If making money on solid companies with great market share positions is boring then, fine, call me the most boring man on the face of the earth," Liss says. "I am perfectly okay with buying companies at discount, waiting for them to go up, and collecting a nice dividend yield in the meantime."

Liss is the 40-year-old co-manager of American Century Equity Income fund (TWEIX), which is a value-oriented fund that focuses on dividend-paying stocks. Over the long haul, the team at TWEIX has built a strong record that crushes the competition.

Through August 26, TWEIX has knocked out a 10-year annualized return of 5.54%, besting the S&P 500 by 6.57 percentage points, and zipping past its peers by 4.71 percentage points, landing in the top 1% of its category. Morningstar awards the fund five stars, its highest rating.

The no-load fund with $5.4 billion in assets has an expense ratio of 0.98% and minimum investment of $2,500.

From his Kansas City office, Liss spoke with Minyanville about the economy, the market, and some of his favorite stock picks right now including Exxon (XOM), Commerce Bancshares (CBSH), Kimberly-Clark (KMB), and Bristol-Myers Squibb (BMY).

Minyanville: What kind of economic recovery are we going to have in the US? Economists predict a V, W, or L. What letter of the alphabet do you pick?

Michael Liss: It is fair to say that a muted, slow recovery is more on the order of what we're thinking. You have 70% of the economy that is consumer-driven. Take whatever consumer debt statistic level you want, they are at all-time high levels. The bulls might say that as soon as housing pops back, people will feel wealthy again, and they'll start spending. These are the same bulls who said people will never default on their homes en masse.

What about the business side of GDP?

Liss: Capacity utilization is at all-time lows. That doesn't lend itself to a big CAPEX (capital expenditure) cycle coming anytime soon on the industrial side. So that leaves just government spending. The debt estimates that came out from the Congressional Budget Office this week are off the charts.

Minyanville: It all seems pretty grim.

Liss: Yes, it is. But balance that against the economy's natural state to grow. That is a strong force. You can't hold that back forever.

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No positions in stocks mentioned.
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