Best Dividend Paying Mutual Funds for 2012
We feature some of the highest & best dividend paying mutual funds available in the marketplace. In this age of volatile stock markets, you need dividend mutual funds to cushion your portfolio against a market downturn. Purchasing dividend paying mutual funds eliminates the need to identify a handful of dividend paying stocks & provides instant diversification across a whole basket of stocks. Purchasing a single fund gets you diversification across a whole range of sectors including Energy & Gas, Banking, HealthCare, Real Estate Investment Trusts (REIT), Telecommunications, Utilities, Technology, Consumer Staples & Discretionary, etc. You should also consider re-investing your dividends back in to your mutual fund for compounded growth. This will make your portfolio grow much faster, in fact, over the last 25 years, the S&P 500 Index has gained 914%. If you add re-invested dividends, it soars to 2000!% Go here for advantages of investing in a dividend paying mutual fund.
Vanguard Dividend Growth (VDIGX) has $10.5 billion in assets under management and is rated 5 star by Morning Star. Just as the name implies, Vanguard Dividend Growth invests in large cap high-quality companies that have the ability and commitment to increase their dividends over time. Almost 91% of the fund’s assets are fully invested in US equities so one of the risks mentioned on the prospectus is this full exposure to equities. If you had invested $10,000 in this fund on July 18th, 2002, your portfolio would be worth $21,674 including re-invested dividends and capital gains. This means an annualized average return of 7.75% in the last 10 years. The fund has returned 2.75% annualized average in the last 5 years beating the S&P 500 that has had negative -11.58% return in the last 5 years.
Below are the top 10 holdings of the fund as of June 30th, 2012. We see high quality companies such as Pepsi with a 3% dividend yield, Johnson & Johnson that has paid dividends since 1972 and has never missed a single year. We also see growth large cap companies such as Medtronic Inc. that has a 2.67% dividend and develops therapies and medicines to treat chronic health conditions. Target, a US based discount retailer with 2.35% dividend yield holds the #4 spot while the world’s 2nd most valuable company, Exxon Mobil with a dividend yield of 2.64% holds the #5 spot. #10 on the list is IBM which has a track record of growing its dividend and earnings per share over the last decade. In fact, IBM has increased 172% in value in the last decade, thus improving this fund’s total returns.
Fidelity Canadian Large Cap Series A fund has $1.4 billion in assets under management and its objective is to deliver superior long term performance by investing primarily in equities of mid and large cap Canadian and international companies. In a video interview titled “Does Success have a Formula – Fidelity Canadian Large Cap fund”, the portfolio manager Daniel Dupont talks about his investing style and how he analyzes companies and industries. He follows 4 important styles that have made this fund a huge success. If you had invested $10,000 in this fund on July 12th, 2002, your portfolio would be worth $25,809 as of July 12th, 2012. This means an average annualized return of 10% a year in the last decade. The average annualized return in the last 5 years is 5.52% which is strongly outperforming the S&P TSX which has had -21% in that period.
The top 10 holdings of the fund are below. There are a total of only 42 stocks and the top 10 make up 45% of the entire mutual fund. This is very high compared to industry average. The top holding Shoppers Drug Mart is licensor of full-service retail drug stores with over 1200 locations through-out Canada. Motorola Mobility makes products and services in the f mobile and wireline digital communication industries and accepted a recent buy-out offer from Google. The 3rd top holding is BP which lost almost half of its value with the BP oil spill in Gulf of Mexico. The stock has since rebounded nicely and this fund has captured some of those gains. Another interesting holding is the Vivendi Group that owns Activision Blizzard, Universal Music Group and acts as a fixed-line and Internet operator in Morocco, Burkina Faso, Gabon, Mauritania and Mali.
Fidelity New Markets Income Fund (FNMIX) has $5.5 billion in assets under management and pays an outsized 5.2% dividend. The fund has a strategy of investing 80% of its assets in debt securities of emerging markets including sovereign bonds, agency bonds, corporate and treasury bonds. Examples of emerging market countries include Venezuela, Mexico, Turkey, Qatar, Brazil, etc. If you had invested $10,000 in this fund on July 11th, 2002, your portfolio would be worth $33,085.59 as of July 11th, 2012. This means an average annualized rate of return of 12.8% which is superb. None of the mutual funds featured on this site, Best Dividend Mutual funds have beaten this performance, if there is one, let us know.
The top 10 holdings of the fund are shown below. We see Sovereign debt securities such as Turkey paying 11.875% coupon that matures in 2030. We also see Brazil Govt bonds paying 12.25% coupon maturing in 2030. These high coupon payments provide for the 5.2% outsized interest yield that this fund pays to unit holders. There are a total of 222 bonds held in the portfolio and the top 10 make up 15% of the entire portfolio.
The RBC Monthly Income fund (RBF448) has $8.2 billion in assets under management and is one of Canada’s largest funds comprising of equity/bond holdings. The fund pays a dividend of 3.95% annualized, distributions are made monthly. The investment objective of RBC Monthly Income fund is to provide a high level of tax efficient monthly distributions and capital gains, while capturing capital growth in the marketplace. The fund is rated 5 star by Morning Star and is available on a no-load basis. If you had invested $10,000 in this fund on July 5th, 2002, your portfolio would be worth $20,415.39 as of July 5th, 2012. This means an average annualized return of 7.42% in the last 10 years while average an annualized 3.78% in the last 5 years.
As of May 31st, 2012, the fund had 49.2% of the portfolio invested in fixed income bonds while having 40.8% in Canadian equities. The fund also keeps a high cash balance of 7.7% to take advantage of market buying opportunities when they arise.
Of the fixed income investments, 33% is in Government bonds while 15.2% is in investment grade Corporate bonds. The other Royal Bank of Canada fund that is heavily invested in corporate bonds is the RBC Global Corporate bond fund (RBF580).
TD Canadian Core Plus Bond (TDB694) has $3.7 billion in assets under management and primarily invests in Canadian denominated Corporate bonds, debt instruments and Government bonds to earn a high level of interest income. The fund also from time to time invests in non-investment grade or non Canadian bonds to enhance the total return. If you had invested $10,000 in this fund on Sept 4th, 2007, your portfolio would be worth $13,752 according to Morning Star. This means an annualized rate of return of 7.5% in the last 5 years, and 7.76% in the last 3 years. To me, this looks like a really impressive fund that also pays a 3% interest yield monthly and is rated 5 star by Morning Star.
The fund invests primarily in investment grade Corporate bonds making up almost 77% of the portfolio. Provincial bonds make up 10.4% while federal government bonds make up 9.6%. In terms of fixed income, the fund is heavily weighted towards short and medium term bonds with 1-5 year bonds making up 40.2% of the asset allocation and 5-10 year bonds making up 38.3%.
The Laudus Growth Investors US Large cap fund (LGILX) has $1.1 billion in assets under management and does not pay a dividend. The fund invests in large companies with dominant market positions, competitive and technological edge over their competitors, and those companies that are trading below their intrinsic value on the open market. The fund buys shares of cyclical and classic growth companies when the entire market sells off for reasons other than the companies at hand. The fundamental objective is to seek long term capital appreciation with calculated risk. The fund has an inception date of October 14, 1997. If you had invested $10,000 in this fund on July 3rd, 2002, your portfolio would be worth $23,231 as of July 3rd, 2012. This implies an average annualized return of 8.9% over the last decade, and 5.46% in the last 5 years.
The top 10 holdings of the fund are given below. We see a large concentration in technology companies like Apple and Google that are trading at low price/earnings multiples and have competitive and technological advantages of their competitors. We also see Amazon which has the highest market share in Electronic commerce and a moat that is literally not replaceable. We also see Visa which processes credit card transactions, carries no financial/bank risks as it gets a percentage fee for each Visa credit card used around the world. Allergan is a great company that makes bio pharmaceutical products for dermatologists and eye care industry. Below is also a graph that shows portfolio composition showing Information Technology (37%), Consumer Discretionary (24%), Healthcare (12.2%), Industrials (8%) are the largest sector holdings.
Wells Fargo Advantage Growth (SGROX) is a 5 star Bronze rated mutual fund by Morning Star with $10.4 billion in assets under management. The fund seeks long term capital growth by investing primarily in large cap companies with robust earnings and intrinsic value that is higher than what the market assigns it. The fund’s team conducts a bottom-up analysis on each company’s market capitalization to find the best investment opportunities in the market. If you had invested $10,000 in this fund in July 1st, 2002, your portfolio would be worth $26,354 as of July 1st, 2012. This translates in to average annualized return of 10% in the last 10 years. The average annualized return in the last 5 years is 7.8% which is really impressive. This fund handily beats the performance of the JP Morgan Mid Cap Value (FLMVX) fund.
RBC Global Corporate Bond fund (RBF580) has an objective of providing high interest income with modest capital growth by investing in global corporate bonds. The fund has $864.5 million in assets under management and has an interest yield of 2.9%. Management expense ratio is 1.73% which is above industry average. However, the returns of this fund are quite impressive. If you had invested $10,000 in this fund in August 23rd, 2004, the value of your portfolio would be worth $14,522 as of June 27th, 2012. This means an average annualized return of 6.8% in the last 5 years.This has handily beat the S&P 500 index that has returned -12.6% in the last 5 years. See the chart below from Morning Star. This fund has outperformed the global fixed income and Barclays Global Aggregate benchmarks as well.
Reynolds Blue Chip Growth (RBCGX) mutual fund has a strategy of investing only in “blue chip” growth companies that will grow their earnings and will reflect higher share prices in the long term. This fund has $186.7 million in assets under management and does not pay a dividend. While the theme of this website is to find the best dividend mutual funds, however we thought this fund was worth taking a look because of its stellar long term performance. If you had invested $10,000 in this fund in June 26th, 2002, your portfolio would be worth $22,360 as of June 26th, 2012.
I came across this dividend mutual fund from an interview on CNBC – Don Yacktman’s top stock picks. The Yacktman fund has $7.4 billion in assets under management and is a Gold 5 star rated fund by Morning Star. 86% of the fund’s assets are invested in large cap blue chip American companies and 12% is held in cash to take advantage of market buying opportunities. If you had invested $10,000 in this fund in 06/24/2002, your portfolio would be worth $26,921 as of 06/24/2012. This results in an average annualized gain of 10.25% in the last decade, and 8.3% in the last 5 years. I have not seen a mutual fund that matches or beats this performance.
Fidelity Strategic Income (FSICX) is has $9.5 billion in assets under management and yields a sporty 4.7% dividend according to Morning Star. The fund invests money in 4 major asset categories including US Government securities, emerging market bonds, high yield bonds and foreign developed market securities. About 93% of the fund is invested in bonds with NO exposure to equities. If you had invested $10,000 in this fund in June 17th, 2002, your portfolio as of today (June 17th, 2012) would have grown to $22,768. This means an annualized rate of return of 8.5% which is very impressive. See the straight-line chart below generated from Morning Star.
JP Morgan Mid Cap Value (FLMVX) mutual fund has $7.4 billion in assets under management and is a top performing mid cap value fund that yields 1.1% dividend. It is rated 5 star by Morning Star and invests primarily in companies that have a market capitalization of between $1 billion to $20 billion. The fund seeks to find undervalued companies that are trading less than their intrinsic value, also sporting a dividend yield. If you had invested $10,000 on June 17th, 2002, your investment would have grown to over $23,385 as of June 17th, 2012. This means the fund returned an average annualized return of 9%.
Mutual Funds Education
- How to Analyze Mutual Fund Investment Risks
- How to Calculate Cost of Equity on Common Stock
- How to Examine a Mutual Fund's Fundamentals
- How to Understand Mutual Fund Load & Operating Expenses
- How to Calculate Free Cash Flow of Mutual Funds
- How to Calculate Net Asset Value (NAV) of Mutual Fund Investments
- How to Calculate Capital Gains/Losses on Mutual Fund Investments
- How to Calculate Mutual Fund Expense Ratio
- Risk Adjusted Returns on Mutual Fund Investments
Mutual Fund Dividends
- Wells Fargo Advantage Growth fund (SGROX)
- RBC Global Corporate Bond Fund (RBF580)
- Reynolds Blue Chip Growth (RBCGX) Mutual Fund
- Yacktman Mutual Fund (YACKX)
- Fidelity Strategic Income Fund (FSICX)
- J.PMorgan Mid Cap Value (FLMVX) Mutual Fund
- Columbia Dividend Opportunity (RSOIX) Fund
- Vanguard Wellesley Income Inv (VWINX) Mutual Fund