Top stock picks from the manager of a dividend fund Morningstar calls one of the best
Michael Barclay is all about consistency. As the lead portfolio manager of the Columbia Dividend Income Fund (LBSAX) , he looks to not just grab yield, but produce the best-risk adjusted returns for its investors. By minimizing volatility, he can keep people invested during market downturns, Barclay said in an interview with CNBC. “If you can keep them in the market and then capture enough of the upside over time, you can really help people build wealth in a consistent fashion,” he explained. “That’s what we’re ultimately trying to deliver to our clients.” The Columbia Dividend Income Fund was recently called out by Morningstar as one of the best dividend funds for 2026. The fund is rated four stars by the financial services firm, with senior analyst Todd Trubey calling its approach “savvy and sound.” It had a 30-day SEC yield of 1.27%, as of Dec. 31, and has an expense ratio of 0.90%. The fund, which launched in 1998, has 15-year and 10-year trailing returns in the top quartile of its peers, and its 5-year returns are in the second quartile, per Morningstar. LBSAX 1Y mountain Columbia Dividend Income Fund one-year performance The Columbia Dividend Fund focuses on stocks that have a history of growing their dividends. However, the team — which also includes portfolio managers Tara Gately and Andrew Wright — takes a total approach return, Barclay said. About 60% to 70% of the return comes from capital appreciation and the other 30% to 40% comes from income, he said. “While we’re only buying stocks of companies that pay dividends, we start by looking at the companies and the fundamentals themselves — and in particular the [free] cash flow,” he said. “We just believe stocks of companies that can grow cash flow are going to be more valuable.” The 58-year-old has been in the business for more than 30 years and with the product for almost 15 years. He was named lead portfolio manager in 2023. While his background is primarily in financials and technology, he takes a generalist approach, as do Gately and Wright. His aim is for all three to agree on a stock before they add it to the fund. They also rely on the company’s teams of analysts to dig into potential names. Its largest allocation is to financials, which makes up 21.76% of the net assets, followed by information technology at 17.49% and health care at 13.0%. Opportunities in pharma These days, Barclay sees the biggest opportunity in large-cap pharmaceutical stocks. It’s an idea he’s been following over the last six months as concerns around drug pricing and tariffs eased and the health-care sector reached a 30-year low, he said. “Large-cap pharma companies are paying dividends. They typically have good balance sheets,” he said. “The free cash flow is solid, and so that’s been an area that we’ve been leaning into, because the value has been there and the fundamental outlook has improved.” Two top pharma picks One of Barclay’s top picks is Johnson & Johnson , which makes up 3.54% of the fund’s net assets, as of Dec. 31. That makes it the second largest holding in the portfolio. The stock, which has a 2.29% dividend yield, has been a long-term holding. The pharma company is “the poster child of what we do,” Barclay said, pointing to its good cash flow, strong balance sheet, good management team and growing dividend. JNJ 1Y mountain Johnson & Johnson one-year performance Plus, it has a diversity of drugs and a robust pipeline, he noted. “They have a wide array of drugs and so they’re not wholly dependent on any one big blockbuster that if it goes off patent is going to leave a huge hole in their financials,” Barclay said. He’s also happy with what the management team has been saying about its expectations through 2030. J & J plans to launch 20 new therapies by then. It said in December it expects sales in its pharmaceutical unit to grow at a compound annual rate of 5% to 7% between 2025 and 2030. Shares of Johnson & Johnson have gained more than 9% year to date. Another pharma pick is AbbVie , which makes up 1.69% of the fund’s net assets. The company saw sales of its blockbuster drug Humira plunge after it lost its monopoly 2023, but it has been able to bounce back with newer immunology treatments Skyrizi and Rinvoq . “There’s good momentum for that to continue to grow,” Barclay said of the new drugs. “They don’t really have any big patent cliffs coming anytime soon and they’ve got drugs that are growing nicely,” he added. ABBV 1Y mountain AbbVie one-year performance AbbVie also has a good balance sheet and has resumed dividend growth now that it has gotten through the “Humira trough,” he added. The stock has a 3.14% dividend yield and is down 3% so far this year. Favorable financial stocks JPMorgan Chase sits in the Columbia Dividend Fund’s top position, making up 4.6% of the portfolio. Bank of America is also among the top ten holdings. Both are stocks that the fund has held for at least a decade, as big banks were able to invest in digital and get an advantage over regional banks on deposits, Barclay said. They are also diversified, he added. “There’s the tailwind of the capital markets right now — having covered the group for 30 years, though, that can be fleeting at times,” he said. “However, it does appear that there’s good momentum there,” he added. “They’re well capitalized, they’re very liquid.” JPMorgan has a 1.96% dividend yield and has shed nearly 6% year to date. Bank of America yields 2.11% and has lost about 4% so far this year.
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