Discounted Tech Fund: Low Risk & Tax-Efficient 7% Dividend Yield

Why this 5-Star rated fund is my top pick for playing the AI boom without sacrificing income.

If you are an income investor, looking at the S&P 500 or the Nasdaq right now is frustrating. Markets are hovering near all-time highs, valuations are stretched, and yields are compressed. Finding a high-quality asset on sale feels impossible.

But occasionally, the market leaves a window open.

Right now, one of the highest-rated funds in my High Yield Database, the Columbia Seligman Premium Technology Growth Fund STK 0.00%↑, is trading at a rare discount. The chart below measures the fund’s price in relation to its NAV (net asset value). As we can see, STK’s price trades at one of the deepest discounts relative to its net asset value.

The High Yield Database rates this as a 5 Star fund for a reason. It offers the “Holy Grail” of investing, which is the aggressive growth potential of the Nasdaq combined with a massive, tax-efficient income stream.

This is NOT A BUY ALERT. I am not adding a position in STK at this time because I have decided to allocate capital elsewhere. Instead, I just wanted to highlight the discount opportunity for investors that prefer a diversified approach.

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1. The “Smart Money” Agree With Me

Regular readers know I recently initiated a Buy Alert on Bloom Energy BE 0.00%↑.

I identified Bloom as a critical “pick and shovel” play for the AI data center boom. Since that call, the stock has been a rocket ship, up significantly as the market realizes that AI needs massive amounts of power.

Bloom is now up more than 68% since that buy alert

Why does this matter for STK? Bloom Energy is now STK’s largest holding.

This validates our thesis. While most tech funds are just lazy aggregators of Apple and Microsoft, STK’s managers are actively hunting for the next leg of growth. They recognized, just like we did, that the semiconductor boom would lead to an energy infrastructure boom.

STK isn’t just holding software; they are diversified into the hardware and infrastructure that powers the modern economy. By owning STK, you are getting exposure to my high-conviction growth plays but in a diversified wrapper.

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2. A 7% Yield That Is Actually Tax-Efficient

Most high-yield funds hit you with “ordinary income” tax rates, which can eat up 37% or more of your returns if you are in a high bracket.

STK is different. Because of how the fund generates cash (through long-term capital gains and option writing), a massive portion of its distribution is often classified as Long-Term Capital Gains.

• The Yield: ~7% annualized.

• The Bonus: Because it is tax-efficient, that 7% spends like a much higher yield compared to standard bond interest or REIT income.

The 7% is just the base pay. STK has a history of paying out massive year-end supplemental distributions when they have a good year. Last year, the total return wasn’t just the quarterly checks; it included a “bonus” that significantly boosted the realized yield. If the tech market continues its 2026 run, the probability of another fat check in December is high.

This is why Yieldly estimates that December is one of the highest paying dividend months for me. Plenty of high quality funds and companies tend to issue bonus dividends in December.

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3. The “Yield Trap” Litmus Test

If you subscribe to my newsletter, you know I warn constantly about “Yield Traps.” These are funds that offer double-digit yields but suffer from a share price that slowly bleeds out over time. They are paying you with your own money.

STK breaks this rule.

Because the underlying technology holdings are compounding earnings at such a rapid rate, STK has managed to grow its Net Asset Value (NAV) over the last decade while simultaneously paying out that steady yield.

This is the ultimate signal of quality for an income investor. It proves that the 7% distribution is funded by real profits and portfolio growth, not by cannibalizing the principal. With STK, you get the income today, and you still own a more valuable asset tomorrow. This is the difference between a “return of capital” and a “return on capital.”

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4. Beating the Benchmark (STK vs. QQQ)

The biggest criticism of high-yield funds is that they underperform the underlying index because they cap their upside. STK defies this logic.

Since my last coverage of this fund, it has delivered a total return of over 20%, outpacing the S&P 500. Looking longer term, STK has proven it can run neck-and-neck with the Invesco QQQ Trust QQQ 0.00%↑ during bull markets while offering a significantly higher cash flow.

This is the power of their “dynamic” option strategy. Unlike funds that robotically sell calls against their whole portfolio (capping all their upside), STK’s managers are active. They pull back on option writing when the market is running hot to capture growth, and they ramp it up when the market is choppy to generate income.

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The Bottom Line

STK checks every box in my High Yield Database:

• ✅ 5-Star Rating for quality and management.

• ✅ High Yield (~7%) with tax advantages.

• ✅ Growth Exposure (Aligned with my Bloom Energy thesis).

• ✅ Value: Trading at a discount to NAV.

If you are looking for a place to park capital that will participate in the AI upside but still pay your bills in the meantime, STK is a strong buy at these levels.