5
Best Dividend Paying Mutual Funds with High Income
If
you read our article on Why to Invest in Dividend
Paying Mutual funds, you know dividends make a very important part
of any investor's portfolio. Dividends provide an instant cash flow return
on your investment and also act as a downside protector in bear markets.
Also, the US stock markets have lost 2% annualized over the last 10 years.
If you were invested in dividend paying mutual funds during this time,
you would probably have made 5% compounded annual gains. In this article,
we will go over 10 best mutual funds that pay dividends. You should also
make sure your mutual fund investments are well diversified ranging from
high income bond funds, utilities, telecommunications & real estate
dividend paying funds, exposure to high quality emerging markets companies,
Large Cap dividend paying companies & some exposure to Small caps.
Fund
Dividend
Yield
Assets
under Management
Category
T.
Rowe Price Equity Income (PRFDX)
1.72%
$23.3
Billion
Large
Cap Value
Vanguard
Dividend Growth Inv (VDIGX)
1.75%
$5.7
Billion
Large
Cap Blend
Franklin
Utilities (FRUAX)
3.44%
$3
Billion
Utilities
Fidelity
New Markets Income (FNMIX)
5.4%
$3.9
Billion
Emerging
Market Bonds
i) T. Rowe Price Equity
Income (PRFDX)
The
T.Rowe Price Equity Income mutual fund is a great no-load mutual fund
that invests in large cap dividend paying American companies such as Chevron
Corp, JP Morgan Chase, General Electric, ExxonMobil Oil, Bank of America,
American Express, etc. According to MorningStar, the fund has returned
an average 5.26% annual return for the last 10 years. Hence, a $10,000
investment in 2001 would have grown to $15,266 as of today. This is great
performance even though most mutual funds have lost money during this
period. The stellar performance is thanks to dividend paying stocks contained
in the portfolio. T. Rowe Price Equity Income currently yields 1.72% and
has $23.3 billion in assets under management. The fund is managed by Brian
C. Rogers who joined the fund in October 1985. Management's investing
philosophy is to find high yielding dividend paying companies that are
Large cap & will be around in 30 years or more. The fund's top 10
holdings as of April 30th, 2011 are:
Vanguard
Dividend Growth mutual fund is a large cap blend fund that invests in
large companies spanning across Industrials, Consumer Defensive, Healthcare,
Energy & Consumer Cyclical dividend paying stocks e.g. Pfizer Inc,
Automatic Data Processing (ADP), ExxonMobil Corp, BG Group plc, etc. The
fund is a no-load fund and yields 1.75% dividends with $5.7 billion in
assets under management. The fund has returned 3.3% annual gain since
2001 hence a $10,000 investment in 2001 would have grown to $13,326 today.
The fund is led by Donald J. Kilbride who joined in 2006 and has a philosophy
of investing in companies that will grow their dividends in 5-10 years
from now. The fund also has a very low expense ratio of 0.34%. The fund
has a total of 47 stocks as of April 30th, 2011 and 6.5% of them are foreign
stocks. The top ten holdings of the fund are:
Franklin
Utilities is a low-fee mutual fund that yields 3.44% in annual dividends
and has $3 billion in assets under management. The fund is led by John
Kohli who started with the fund in 1998. Franklin Utilities invests in
high quality utility companes that pay high dividends. E.g. Southern Company,
Sempra Energy, NextEra Energy, PG&E Corp, Entergy Corp, etc. All Americans
need utilities & electricity in their homes, thus this fund takes
advantage of smaller regional Utilities companies that pay high dividends.
E.g. Sempra Energy is a holding company of 6 other regional utility companies
including San Diego Gas & Electric, Southern California Gas, Sempra
Liquified natural gas, etc. Over the last 10 years, the fund has outperformed
the S&P 500 by returning an annual return of 6.87% which is really
impressive. A $10,000 investment in 2001 would have grown to $19,476 in
2011 which represents a growth of 94.7%. Dividends accounted for almost
26% of this fund's great performance. If you read the fund's strategy
from the link below, we find out that the fund seeks to maximize opportunities
in the U.S. electricity and gas sector finding regulated utilities due
to their more predictable earnings and cash flow. What I don't like about
this fund is the initial 4.25% sales charge. Talk to your 401k plan administrator
to see if you can skip paying this sales charge and still be invested
in the fund i.e. if you are interested in investing in this fund. The
fund's top 10 holdings as of March 31st, 2011 are:
Fidelity
New Markets Income fund is a low fee bond mutual fund that invests 80%
of its assets in emerging markets bonds & debt securities. The fund
has $3.9 billion in assets under management and yields a high 5.4% dividend.
The fund has diversified investments in emerging market bonds including
Russia Federation bonds, Philippines bonds, Turkey Republic bonds, IRAQ
& Venezuela Government bonds. According to MorningStar, the fund has
61% assets in foreign government bonds & 31% assets in foreign corporate
bonds. A $10,000 investment in this fund in 2001 would have grown to over
$30,191 in 2011 representing average annual returns of 11.87%. The fund
has a management expense ratio of 0.89% which is slightly above average
of other mutual funds. Emerging market bond funds tend to be of higher
risk because of political & economic environments, government policies,
interest rate risks, etc. The fund's top 10 holdings as of March 31st,
2011 are:
T.
Rowe Price Real Estate fund aims to invest 80% of its assets in equities
of real estate companies with a view to provide long term capital growth
& current income through dividends. It currently has a market capitalization
of $3 billion and yields a 2.10% dividend. This fund holds REITs (Real
Estate Investment Trusts) that are required by law to distribute 90% of
their profits to shareholders, thus paying high dividends. Examples of
such companies that this fund holds include Boston Properties, SL Green
Realty Corp, Vornado Realty Trust, etc. As an example, Vornado Realty
Trust owns business interests in New York Office Properties; Washington,
DC Office Properties; Retail Properties; Merchandise Mart Properties,
and Toys R Us (Toys). Vornado also owns a 646,000 square foot retail property
located in California that it leases to commercial customers and receives
rental revenue. The top 10 holdings of this fund as of March 31st, 2011
are:
If
you read our article on Why to Invest in 
The
T.Rowe Price Equity Income mutual fund is a great no-load mutual fund
that invests in large cap dividend paying American companies such as Chevron
Corp, JP Morgan Chase, General Electric, ExxonMobil Oil, Bank of America,
American Express, etc. According to MorningStar, the fund has returned
an average 5.26% annual return for the last 10 years. Hence, a $10,000
investment in 2001 would have grown to $15,266 as of today. This is great
performance even though most mutual funds have lost money during this
period. The stellar performance is thanks to dividend paying stocks contained
in the portfolio. T. Rowe Price Equity Income currently yields 1.72% and
has $23.3 billion in assets under management. The fund is managed by Brian
C. Rogers who joined the fund in October 1985. Management's investing
philosophy is to find high yielding dividend paying companies that are
Large cap & will be around in 30 years or more. The fund's top 10
holdings as of April 30th, 2011 are:
Vanguard
Dividend Growth mutual fund is a large cap blend fund that invests in
large companies spanning across Industrials, Consumer Defensive, Healthcare,
Energy & Consumer Cyclical dividend paying stocks e.g. Pfizer Inc,
Automatic Data Processing (ADP), ExxonMobil Corp, BG Group plc, etc. The
fund is a no-load fund and yields 1.75% dividends with $5.7 billion in
assets under management. The fund has returned 3.3% annual gain since
2001 hence a $10,000 investment in 2001 would have grown to $13,326 today.
The fund is led by Donald J. Kilbride who joined in 2006 and has a philosophy
of investing in companies that will grow their dividends in 5-10 years
from now. The fund also has a very low expense ratio of 0.34%. The fund
has a total of 47 stocks as of April 30th, 2011 and 6.5% of them are foreign
stocks. The top ten holdings of the fund are:
Franklin
Utilities is a low-fee mutual fund that yields 3.44% in annual dividends
and has $3 billion in assets under management. The fund is led by John
Kohli who started with the fund in 1998. Franklin Utilities invests in
high quality utility companes that pay high dividends. E.g. Southern Company,
Sempra Energy, NextEra Energy, PG&E Corp, Entergy Corp, etc. All Americans
need utilities & electricity in their homes, thus this fund takes
advantage of smaller regional Utilities companies that pay high dividends.
E.g. Sempra Energy is a holding company of 6 other regional utility companies
including San Diego Gas & Electric, Southern California Gas, Sempra
Liquified natural gas, etc. Over the last 10 years, the fund has outperformed
the S&P 500 by returning an annual return of 6.87% which is really
impressive. A $10,000 investment in 2001 would have grown to $19,476 in
2011 which represents a growth of 94.7%. Dividends accounted for almost
26% of this fund's great performance. If you read the fund's strategy
from the link below, we find out that the fund seeks to maximize opportunities
in the U.S. electricity and gas sector finding regulated utilities due
to their more predictable earnings and cash flow. What I don't like about
this fund is the initial 4.25% sales charge. Talk to your 401k plan administrator
to see if you can skip paying this sales charge and still be invested
in the fund i.e. if you are interested in investing in this fund. The
fund's top 10 holdings as of March 31st, 2011 are:
Fidelity
New Markets Income fund is a low fee bond mutual fund that invests 80%
of its assets in emerging markets bonds & debt securities. The fund
has $3.9 billion in assets under management and yields a high 5.4% dividend.
The fund has diversified investments in emerging market bonds including
Russia Federation bonds, Philippines bonds, Turkey Republic bonds, IRAQ
& Venezuela Government bonds. According to MorningStar, the fund has
61% assets in foreign government bonds & 31% assets in foreign corporate
bonds. A $10,000 investment in this fund in 2001 would have grown to over
$30,191 in 2011 representing average annual returns of 11.87%. The fund
has a management expense ratio of 0.89% which is slightly above average
of other mutual funds. Emerging market bond funds tend to be of higher
risk because of political & economic environments, government policies,
interest rate risks, etc. The fund's top 10 holdings as of March 31st,
2011 are: