Investment objectives often involve getting steady returns in the form of dividends. Particularly in times of volatility, regular dividends help to soften the blow of falling stock prices. Mutual fund itself is a great tool for alternative investment given its characteristics of diversification, liquidity and economies of scale among others. On top of it, mutual funds paying high dividends assure consistent stream of income opportunities; and thus are lucrative investment options.
Cushion from Volatility
After the record run in 2013; wherein the benchmarks kept hitting record highs on several instances, markets started this year on a very dismal note. Emerging market concerns, China's dismal economic data and finally the Federal Reserve's $10 billion cut to the economic stimulus dealt severe blows to the markets. In January, the blue-chip index plunged 5.3%, S&P 500 was down 3.6% and Nasdaq declined 1.7%. This was the blue-chip index' worst start since 2009.
However, things turned remarkably well soon after and benchmarks ended higher in February. The Dow Jones jumped 4% in February while S&P 500 and Nasdaq scored gains of 4.3% and 5%, respectively. It was Nasdaq's biggest monthly gain since September 2013. Since end of January, the Dow, S&P 500 and Nasdaq have gained 5.9%, 6.6% and 5.7%, respectively.
However, volatility cannot be ruled out in near future given the various macroeconomic factors. On the domestic front, the Federal Reserve has decided to stick to its stimulus cut. Starting April, the bond buyback plan will be $55 billion. Separately, the standoff between Russia and western nations over the annexation of Crimea is a lingering issue of late. (Read: Russia Mutual Funds to Watch on Ukraine Crisis)
Equity Income Funds
Equity funds whose primary objective is to provide regular income flows are a natural choice for investors willing to forgo long term-capital appreciation for current income. A portfolio providing income as well as holding equities also offers better diversification. Mutual funds holding income generating equity securities offer a convenient route to investors looking to hold a well diversified portfolio.
To summarize, dividend paying mutual funds are one of the best diversified ways to boost portfolio returns. Also, it is also often said that companies paying dividends are usually the matured firms and have a healthy financial structure.
Let us look at equity mutual funds that sport a Zacks Mutual Fund Rank #1 and have dividend yield of at least 3%.
Madison Covered Call & Equity Income A (MENAX) seeks steady constant returns and high income from option premiums. The fund invests in mid cap and large cap equity securities. Companies with growth potential are also considered for investment. A minimum of 65% of its assets are invested in large cap companies.
The fund has a dividend yield of 5.48%. The fund has returned 11.26% and 8.16% over the last one and three years, respectively.The fund's top holdings include eBay Inc, Directv and Advance Auto Parts Inc.
American Funds Capital Income Builder A (CAIBX) seeks increasing income over years and capital appreciation is the secondary aim. It invests 90% of its assets in a variety of income-producing securities. The fund may also invest in foreign common stocks or bonds.
The fund has a dividend yield of 3.13%. The fund has returned 10.70% and 9.26% over the last one and three years, respectively. The fund's top holdings include Philip Morris International, Inc., Altria Group Inc. and Vodafone Group PLC.
View All Zacks #1 Ranked Mutual Funds
Get Your Free (CAIBX): Fund Analysis Report
Get Your Free (MENAX): Fund Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Market News and Data brought to you by Benzinga APIsCushion from Volatility
After the record run in 2013; wherein the benchmarks kept hitting record highs on several instances, markets started this year on a very dismal note. Emerging market concerns, China's dismal economic data and finally the Federal Reserve's $10 billion cut to the economic stimulus dealt severe blows to the markets. In January, the blue-chip index plunged 5.3%, S&P 500 was down 3.6% and Nasdaq declined 1.7%. This was the blue-chip index' worst start since 2009.
However, things turned remarkably well soon after and benchmarks ended higher in February. The Dow Jones jumped 4% in February while S&P 500 and Nasdaq scored gains of 4.3% and 5%, respectively. It was Nasdaq's biggest monthly gain since September 2013. Since end of January, the Dow, S&P 500 and Nasdaq have gained 5.9%, 6.6% and 5.7%, respectively.
However, volatility cannot be ruled out in near future given the various macroeconomic factors. On the domestic front, the Federal Reserve has decided to stick to its stimulus cut. Starting April, the bond buyback plan will be $55 billion. Separately, the standoff between Russia and western nations over the annexation of Crimea is a lingering issue of late. (Read: Russia Mutual Funds to Watch on Ukraine Crisis)
Equity Income Funds
Equity funds whose primary objective is to provide regular income flows are a natural choice for investors willing to forgo long term-capital appreciation for current income. A portfolio providing income as well as holding equities also offers better diversification. Mutual funds holding income generating equity securities offer a convenient route to investors looking to hold a well diversified portfolio.
To summarize, dividend paying mutual funds are one of the best diversified ways to boost portfolio returns. Also, it is also often said that companies paying dividends are usually the matured firms and have a healthy financial structure.
Let us look at equity mutual funds that sport a Zacks Mutual Fund Rank #1 and have dividend yield of at least 3%.
Madison Covered Call & Equity Income A (MENAX) seeks steady constant returns and high income from option premiums. The fund invests in mid cap and large cap equity securities. Companies with growth potential are also considered for investment. A minimum of 65% of its assets are invested in large cap companies.
The fund has a dividend yield of 5.48%. The fund has returned 11.26% and 8.16% over the last one and three years, respectively.The fund's top holdings include eBay Inc, Directv and Advance Auto Parts Inc.
American Funds Capital Income Builder A (CAIBX) seeks increasing income over years and capital appreciation is the secondary aim. It invests 90% of its assets in a variety of income-producing securities. The fund may also invest in foreign common stocks or bonds.
The fund has a dividend yield of 3.13%. The fund has returned 10.70% and 9.26% over the last one and three years, respectively. The fund's top holdings include Philip Morris International, Inc., Altria Group Inc. and Vodafone Group PLC.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
View All Zacks #1 Ranked Mutual Funds
Get Your Free (CAIBX): Fund Analysis Report
Get Your Free (MENAX): Fund Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Benzinga simplifies the market for smarter investing
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
Join Now: Free!
Already a member?Sign in
