Latest news with #AdamsDiversifiedEquityFund
Forbes
3 days ago
- Business
- Forbes
The Latest Debt Downgrade Is Our Shot At Cheap 9% Dividends
This latest US debt downgrade is a buying opportunity for us contrarians. I say that because we had the same (profitable) setup the last three times the ratings agencies took Uncle Sam's credit rating down a peg. You might find that last sentence surprising. Three times? Indeed, the US government has seen its debt downgraded on three different occasions: 2011, 2023 and most recently a couple of weeks ago. You can be forgiven for not remembering all of these: In some cases (2023 comes to mind), they didn't really make headlines. In others, they set up a small dip in stocks (and stock-focused closed-end funds yielding 8%+) that was well worth buying. Let's go through all three occasions and see what they can tell us. We'll also look at how they affected the performance of the Adams Diversified Equity Fund (ADX), a holding in my CEF Insider service. ADX pays a roughly 9% dividend as I write this and sports a discount to net asset value (NAV, or the value of its underlying portfolio) of around 8%. The fund holds some of the biggest (and most credit-worthy!) US stocks, like Apple (AAPL), Microsoft (MSFT) and Visa (V), not to mention top-quality lenders like JPMorgan Chase & Co. (JPM). Let's start in August 2011, when debt-ceiling wrangling in Congress prompted Standard & Poor's to downgrade US government debt. At the time, this move was historic: No agency had ever downgraded the US government's credit, which was considered incredibly safe. What happened next? US long-term Treasuries (in blue below) surged some 20% from the day of the downgrade through the end of 2011. The S&P 500 (in orange) also had a good run, returning nearly 6% over those few months. ADX (in purple) trailed behind, but as we'll see next, this lag made it the best opportunity of the three. ADX 2011 Ycharts Buying the S&P 500 was clearly a smart move here. But playing the contrarian and buying bonds after the downgrade delivered even faster returns. Over the long run, however, it was ADX (in purple below) that won out, with dividends reinvested: ADX Total Returns Ycharts Now let's look at the next downgrade, in August 2023. This time it was Fitch that cut Uncle Sam to the agency's second-highest rating. ADX 2023 Ycharts ADX (in purple above) has returned about 44% since then, as of this writing, well ahead of the S&P 500's 30% gain (in orange). Meantime, Treasuries (in blue) are in the red. Why the difference in government-bond action between this downgrade and the first one? That's another article on its own, but suffice it to say, it had more to do with slower-than-expected Fed rate cuts than the downgrade. The most recent downgrade, just a couple weeks ago, did cause a dip in stocks, ADX and bonds, however—though ADX has fallen the least as I write this. These declines are likely the result of tariff uncertainty, which has caused more anxiety than we saw in late 2023, when stocks were recovering from the 2022 pullback. ADX 2025 Ycharts As you can see above, all three stayed flat until falling a little on May 20, then falling sharply the next day, when Walmart warned about price increases (and therefore lower consumer spending), and Target reported disappointing sales. The smart money did not sell when the news was first released on the 16th, but we are probably seeing more selling pressure as the retailers' warnings have added anxiety. In the coming days, we could see stocks go flat or slightly negative if the sour attitude sticks around. But that would be a buying opportunity—especially for equity CEFs like ADX—similar to the openings we saw in 2023 and 2011. Another important point: the downgrade doesn't impact all US assets. In its announcement, Moody's makes clear that the downgrade impacts America's 'long-term issuer and senior unsecured' debt, but 'the US long-term local- and foreign-currency country ceilings remain at Aaa.' In other words, the downgrade applies to US Treasuries greater than one year in duration (government bonds, basically, up to and including 30-year issues). Those bonds now have the second-highest rating from all three ratings agencies. At the same time, non-government debt issuers in the US can still have the top rating—including American companies. In fact, Apple (AAPL), Microsoft (MSFT) and Johnson & Johnson (JNJ) still have the Aaa rating from Moody's. (Note that ADX holds Apple and Microsoft, so it's a good pick if you're still concerned about credit quality.) Michael Foster is the Lead Research Analyst for Contrarian Outlook. For more great income ideas, click here for our latest report 'Indestructible Income: 5 Bargain Funds with Steady 8.6% Dividends.' Disclosure: none
Associated Press
21-04-2025
- Business
- Associated Press
Adams Diversified Equity Fund Declares Distribution
BALTIMORE, April 21, 2025 (GLOBE NEWSWIRE) -- On April 17, 2025, Adams Diversified Equity Fund, Inc. (NYSE: ADX) declared a distribution of $0.46 per share payable May 30, 2025 to shareholders of record on April 28, 2025. The distribution is optionally payable in additional shares of common stock (default) or in cash by specific stockholder election received before 4 p.m. (ET) on May 16, 2025, the valuation date. The issue price for shares will be the Fund's closing NYSE market price on the valuation date. The Fund's estimated sources for the distribution to be paid on May 30, 2025 and for all distributions declared in 2025 to date are as follows: Fund Performance and Distribution Rate Information: 1 Total return is calculated assuming a purchase of a Fund share at the beginning of the period and a sale on the last day of the period at reported net asset value per share, excluding any brokerage commissions. Distributions are assumed to be reinvested at the lower of the net asset value per share or the closing NYSE market price on the distribution's valuation date for those receiving shares for the distribution. For periods greater than one year, returns are presented on an annualized basis. 2 The Annualized Current Distribution Rate is the current quarter's distribution rate per share annualized and expressed as a percentage of the Fund's NAV per share as of March 31, 2025. 3 The Cumulative Fiscal Year Distribution Rate is the distributions per share declared for the current fiscal year expressed as a percentage of the Fund's NAV per share as of March 31, 2025. You should not draw any conclusions about the Fund's investment performance from the amount of the current distribution or from the terms of the Fund's Distribution Policy. The amounts and sources of distributions reported herein are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. About Adams Funds Since 1929, Adams Funds has consistently helped generations of investors reach their investment goals. Adams Funds is comprised of two closed-end funds, Adams Diversified Equity Fund, Inc. (NYSE: ADX) and Adams Natural Resources Fund, Inc. (NYSE: PEO). The Funds are actively managed by an experienced team with a disciplined approach and have paid dividends for more than 90 years across many market cycles. The Funds are committed to paying a minimum annual distribution rate of 8% of NAV paid evenly each quarter throughout the year, providing reliability for long-term shareholders. A portion of any distribution may be treated as paid from sources other than net income, including but not limited to short-term capital gain, long-term capital gain, and return of capital. The final determination of the source of all distributions for tax reporting purposes in a calendar year, including the percentage of qualified dividend income, will be made after year-end. Shares can be purchased through our transfer agent or through a broker. For more information about Adams Funds, please visit: For further information: │800.638.2479
