7 Best Dividend Mutual Funds: 2015 Edition


Ah, the dividend. Is there anything more beautiful than receiving regular payments from your money? Not from some employer for your labor, not from a renter, but more money from your money. A gift from money.

You know what I’m talking about: the joy of cashflow producing assets. After all, why else would you be reading a post on the best dividend mutual funds if you hadn’t been struck by the stark, utilitarian beauty that is the dividend payment? The dividend! The Statue of David of the investing world.

But I digress. Back to the topic at hand. I’ve compiled a list of the best dividend mutual funds which ought to, ideally, be of some assistance to you, the reader, when it comes to deciding what to do with your investments.

My methodology: Here’s how I picked out the funds below. I went into Reuter’s mutual fund screener and restricted the universe of mutual funds based on the following criteria:

  • Has to be an equity fund
  • Must accept new investors
  • Minimum buy-in must be less than 5,000 dollars
  • Has a dividend yield greater than 2%
  • Has a management fee of less than 1%
  • Has a five-star rating from Lipper Leaders when it comes to total return

This screen returned 36 different mutual funds. I think went through each one and filtered out all of those who had a Morningstar rating of less than 5 stars. Here’s what I was left with. I’ve ranked these from highest dividend yield to lowest.

Voya Corporate Leaders Trust B (LEXCX)

From a Wall Street Journal article  on LEXCX.

From a Wall Street Journal article on LEXCX.

Key stats:

  • Trailing Twelve Month Yield: 5.62%
  • Expenses: 0.50%
  • Minimum investment: $1,000
  • Total assets: $1.7 billion

LEXCX is an interesting fund. It was set up in 1935. At the time, it bought an equal number of shares of the 30 leading US companies. Stranger still, the fund is under certain restrictions, such that it can’t invest in new companies, except in special situations, like a merger.

Thus, today, the fund holds 22 large-cap, blue chip stocks. One article on Yahoo Finance describes the fund as the ultimate “buy and hold forever” mutual fund. And with a 5.62% dividend yield, it looks tempting.

My thoughts: This is a weird fund. With a low cost broker – I recommend TradeKing – you could recreate it without too much hassle. Just buy equal positions in its 22 holdings. Then, you won’t have to pay the expense ratio.

American Funds Intl Gr and Inc (RIGGX)

Screen Shot 2014-11-16 at 5.05.33 PM

Key stats:

  • Trailing Twelve Month Yield: 3.47%
  • Expenses: 0.59%
  • Minimum investment: $250
  • Total assets: $9.8 billion

There is very little information about RIGGX available on the web. The fund’s stated objective is conservative, international investments. According to MorningStar’s analysts, RIGGX seeks to achieve a before expenses yield of 3.5%.

My thoughts: Since there’s not that much information available, I’m forced to rely on the funds holdings. They hold a big stake in TSMC, a stock which I like, so that’s one positive point. I wouldn’t have it an international fund as my main holding, but I might recommending hold this for diversification, assuming you’re not investing in Betterment.

Wasatch Strategic Income (WASIX)

Screen Shot 2014-11-16 at 5.07.10 PMKey stats:

  • Trailing Twelve Month Yield: 2.69%
  • Expenses: 0.95%
  • Minimum investment: $2,000
  • Total assets: $116.3 million

As you’ll note by total assets, WASIX is a small fund. It focuses on a conservative asset allocation and regular income. Growing capital is a secondary concern. Expenses, at nearly 1%, are also about .5% higher than I’d like.

My thoughts: This fund might be worthwhile for those nearing or in retirement, but do your research first.

Vanguard High Dividend Yield Index (VHDYX)

Screen Shot 2014-11-16 at 5.08.05 PM

Key stats:

  • Trailing Twelve Month Yield: 2.68%
  • Expenses: 0.19%
  • Minimum investment: $3,000
  • Total assets: $13.8 billion

On this site, I probably recommend Vanguard products more than any other. I have no incentive to do so: I don’t make any money whenever someone invests in Vanguard (unfortunately!).

No, the reality is that their products are just better than 99% of the competition. This is the same reason that I like out to Amazon all the time. The costs are better than the competition.

VHDYX is no exception. If I were to invest in just one of these funds, it’d be this one.

Why? First of all, that expense ratio is tough to beat and, second of all, while I have some doubts about whether the yield on the other funds will be maintained over the long-term, I don’t have these qualms about this Vanguard fund. The entire purpose of it is in the name: “High Dividend Yield Index.”

Buying this is like owning a small slice of every high-dividend yield stock.

Schwab International Core Equity (SICNX)

Key stats:

  • Trailing Twelve Month Yield: 2.62%
  • Expenses: 0.86%
  • Minimum investment: $100
  • Total assets: $331.2 million

This is another small fund, like a mix between RIGGX and WASIX. It’s heavily weighted towards developed, international companies – places like Japan, the UK, and Western Europe in general.

The fund’s largest holding is Nestle, which I have no opinion on. According to Schwab’s website, the fund, “seeks long-term capital growth by primarily investing in equities of publicly traded companies in select countries outside the United States.”

But so do most others.

My thoughts: I wouldn’t make this my primary holding (unless I was especially bearish on the US), but it might be okay to fulfill some % international of your asset allocation.

Vanguard Equity-Income Fund (VEIPX)

Screen Shot 2014-11-16 at 5.09.33 PM

Key stats:

  • Trailing Twelve Month Yield: 2.48%
  • Expenses: 0.30%
  • Minimum investment: $3,000
  • Total assets: $18.4 billion

Like I mentioned above, Vanguard funds are some of my favorite. This one is no exception, although I think that the one mentioned above is a better deal.

Like the others on this list, this one seeks to provide stable income – via the beautiful dividend. According to Vanguard’s website, “This fund is designed to provide investors with an above-average level of current income while offering exposure to the stock market. Since the fund typically invests in companies that are dedicated to consistently paying dividends, it may have a higher yield than other Vanguard stock mutual funds.”

My thoughts: The main problem that I have with this fund is that it looks essentially the same as VHDYX, but the management fees are higher. So if you’re in the market, why not just buy VHDYX?

SunAmerica Focused Dividend Strategy (FDSAX)

Screen Shot 2014-11-16 at 4.45.02 PMKey stats:

  • Trailing Twelve Month Yield: 2.17%
  • Expenses: 0.98%
  • Minimum investment: $500
  • Total assets: $8.5 billion

This fund is a more reasonable (and thus less interesting) take on what was happening with the first fund, LEXCX. While that fund bought a stake in 30 companies in 1935 and intends to hold it forever, this fund buys a stake in 30 high-dividend companies and then rebalances every year.

My thoughts: This seems like a solid fund. You can see holdings here. I have two main concerns: 1) the expenses are higher than I’d like and 2) with only 30 holdings, why not just build your own portfolio of high-quality, blue-chip stocks? These are the same concerns that I had with LEXCX, although I guess in this case there’s at least the possibility of a value-add by the manager. So there’s that.

Final Thoughts

Okay, so you’ve made it this far. I’ve just covered the 7 best dividend mutual funds. But maybe you want to know, if I had to pick just one, which would it?

VHDYX. I actually already have money in this fund, or one of Vanguard’s similar ones – I can’t recall off the top of my head. So I’m not just talking. I have skin in the game.

Alternatively, I think a good option would be to just open a TradeKing account and then buy stakes in a bunch of different high-dividend stocks. You can use a screener, like Yahoo Finance’s, to find them.

So go out there. Get them dividends. Build your own financial Statue of David. You, the Dividend Michelangelo.

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Comments

  1. Brigham says

    Do you have a good tool too look up MF holdings? I haven’t been able to find complete lists, only top 10 holdings per fund.

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