5 Best Dividend Mutual Funds to Buy Now
By: Ned Piplovic,
Exchange-traded funds (ETFs) are gaining popularity as the investment of choice for investors looking for easy diversification. However, to maximize investment returns, investors also seek best dividend mutual funds, which can offer steady income distributions to complement their asset appreciation.
To maximize investment returns, investors can buy the best dividend mutual funds, which will offer steady income distributions to complement asset appreciation. The following list contains the five best dividend mutual funds with dividend yields exceeding 3%, 12-month total returns of at least 3.5% and double-digit percentage total returns over the past three and five years.
5 Best Dividend Mutual Funds to Buy Now: #5
Delaware National Hi-Yield Municipal Bond Class C (NASDAQ:DVHCX)
The mutual fund has 507 holdings with total assets in excess of $1.3 billion and tracks the investment results of the Bloomberg Barclays Municipal Bond Index. However, DVHCX industry exposure differs from the underlying Bloomberg Index. DVHCX’s top three sector allocations – Hospital (26.3%), Industrial Development Revenue (IDR) and polluting control revenue (PCR) municipal bonds (21.8%) and Education (13.3%) account for more than 60% of the funds’ total assets. Those same three sectors account for less than 19% of the Bloomberg Index’s asset allocation.
While the DVHCX fund’s monthly distributions delivered a 6.08% forward yield, the unit price decline limited the total return over the past year to 3.86%. However, the fund performed significantly better over the past three years with a 26.45% total return and a 39% total return over the past five years.
5 Best Dividend Mutual Funds to Buy Now: #4
Eaton Vance Global Income Builder I (NASDAQ:EDIIX)
This mutual fund invests in U.S. and international common stocks, income instruments, preferred stocks and hybrid securities deemed by the portfolio managers to offer attractive levels of income. More than half of the fund’s $160 million in total assets are in common stocks – U.S. stocks, 33.5%, and foreign stocks, 24.45%. Additionally, 22.61% of total assets are in U.S. corporate bonds, 12.67% in foreign corporate bonds and the remaining 6.63% spread relatively evenly between cash, floating-rate loans and preferred stocks.
The fund’s highest exposure of approximately 18% each is to the Information Technology and Financials sectors. Furthermore, the Industrial sector’s 15.38% of total assets is ahead of Health Care with 11.45% and the Consumer Discretionary sector with 11.43%.
The fund’s monthly distributions currently offer a 3.8% yield and a 4.88% total return over the trailing 12 months. The longer-term total returns were 26.45% over the three years and just shy of 39% for the five-year period.
5 Best Dividend Mutual Funds to Buy Now: #3
Nationwide Investor Destinations Aggressive Fund R (NASDAQ:GAFRX)
The fund seeks to maximize total investment return for an aggressive level of risk. As of Oct. 5, the GAFRX fund had more than $1 billion in net assets allocated across 12 individual holdings and all but one of these holdings were other Nationwide mutual funds. However, the top three holdings account for nearly three quarters of the fund’s total assets – Nationwide S&P 500 Index R6 (NASDAQ:GRMIX) with 33.9%, Nationwide International Index R6 (NASDAQ:GIXIX) with 25.5% and Nationwide Mid-Cap Market Index R6 (NASDAQ:GMXIX) with 20.3%.
The fund currently offers a 3.08% yield and has increased its annual distribution payout for the past seven consecutive years. Over those seven years, the fund’s total annual distribution amount advanced more than 12-fold, which corresponds to an average growth rate of more than 43% each year.
The funds unit price rose to provide an equal amount of payback, since the fund’s distribution helped to fuel a total return of 66.08% over the last year. The total returns over the past three and five years were 31.6% and 36.5%, respectively.
5 Best Dividend Mutual Funds to Buy Now: #2
Camelot Premium Return A (NASDAQ:CPRFX)
This fund seeks to achieve its investment objectives primarily through equity-based option writing strategies, including cash-secured puts and covered calls. The premium received from writing options potentially generates gains for the fund. Plus, the fund also may invest in dividend-paying or non-dividend-paying common stocks with market capitalizations of at least $1 billion. The fund’s approach is to target a consistent and rising cash flow distribution that is not reliant on changing market conditions. The fund also aims to deliver favorable total return with reduced volatility over a normal market cycle of five to seven years.
As of the second quarter of 2018, the fund had more than 80% of its assets in stocks (62.7%) and bonds (20.5%). The remaining assets were in cash (8.2%) and other investments (8.5%). The fund’s biggest exposure was in the Consumer Cyclical sector (31%), followed by Real Estate (20.3%), Financial Services (13.7%), Energy (12%) and four additional sectors with share percentages in single digits.
The fund hiked its quarterly distributions from its previous $0.84 payout to the current $0.89 amount, which converts to a 3.61% dividend yield. The unit price recovered fully from a 4.5% drop in Q1 2018 and currently trades almost 2% higher than 12 months earlier. The combined total return was 6.73% over the same 12-month period and more than 27% over the past three years.
5 Best Dividend Mutual Funds to Buy Now: #1
Eaton Vance Tax-Managed Global Dividend Income Fund (I) (NASDAQ:EIDIX)
This Eaton Vance fund invests primarily in common stocks and, at the managers’ discretion, preferred stocks around the world that pay dividends that qualify for taxation at long-term capital gains rates. This strategy seeks to maximize the after-tax total return. The funds 160 individual holdings amount to almost $730 million in total assets. These assets are allocated almost evenly between foreign common stocks, 47.36%, and U.S. common stocks, 46.44%, with 3.64% of remaining assets in preferred stock and other investment types, as well as 2.53% in cash.
Among the fund’s individual securities, the top 10 holdings account for less than 18% combined and only three holdings exceed 2% share of total assets – Alphabet, Inc. (NASDAQ:GOOG) with 2.86%, Amazon.com, Inc. (NASDAQ:AMZN) with 2.25% and Microsoft Corporation (NASDAQ:MSFT) with 2.1%. ASML Holding NV (NASDAQ:ASML) with 1.61% share of total assets and Apple, Inc. (NASDAQ:AAPL) with 1.59% round out the top five holdings, which combine to slightly more than 10% of the fund’s total assets. The fund pays monthly distributions, which currently yield 3.53%.
The Camelot Premium Return fund in the second spot has a slightly higher yield – 3.61% versus 3.53% – as well as a marginally higher total return over the past year – 6.73% versus 6.40%. However, the Eaton Vance fund has a nearly 6% edge in the total return over the past three years of nearly 29%, and a 54% advantage over the past five years with a total return of nearly 41%.
The list of the top 5 best dividend mutual funds to buy now named above ranks the funds primarily by their total returns over the past one and three years. Regardless of the spot on the list above, investors should conduct their own research to validate that the additional metrics of these securities, such as unit-price trend, long-term and short-term total returns trends, risk ratings, etc., fit their portfolio strategies. General investment advice is useful to narrow the field of available options. However, every investment portfolio has a unique set of goals and characteristics. Therefore, individual investors must ultimately determine their own strategy and choose the specific combination of equities that will best support their financial goals.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.