5 High Dividend Mutual Funds for Your Portfolio
By: Ned Piplovic,
High dividend mutual funds still can provide steady returns even though exchange-traded funds (ETFs) are gaining popularity as the investment of choice for investors seeking easy diversification.
To maximize one’s investment returns, investors can seek out high dividend mutual funds that offer robust asset appreciation in addition to steady income distributions in order to produce strong total returns over an extended time horizon.
The list below contains five high dividend mutual funds with yields exceeding 8%. Additionally, only one of these five mutual funds provide a 12-month total percent return that is in the single digits. The other four funds have double-digit percentage total returns over the past year. Over the past three years, the five funds have total returns between 14% and 30%.
5 High Dividend Mutual Funds for Your Portfolio: #5
Unconstrained Emerging Markets Bond Fund – Class Y (NASDAQ:EMBYX)
The VanEck Unconstrained Emerging Markets Bond Fund seeks returns by investing in debt securities that are issued by governments, quasi-government entities or corporations in emerging market countries.
As of October 31, 2019, nearly half of the fund’s assets are invested in sovereign bonds, a third are in corporate bonds, 11% are in quasi-sovereign bonds and approximately 6.5% were in cash and cash equivalents. Out of the 27 countries represented in the fund, holdings from the top five countries — Brazil, Mexico, Argentina, Indonesia and Ukraine — accounted for more than 45% of the fund’s total assets. Brazil and Mexico (11.7%) and Argentina (10) were the only two countries with shares in the double-digit percentages.
Because the unit price fell from its 52-week low back to just slightly above its level from one year earlier, the fund’s total annual dividend distributions of 8.12% contributed nearly 98% of the 8.3% total returns over the trailing 12 months. The three-year total return is 14.2%.
5 High Dividend Mutual Funds for Your Portfolio: #4
American Beacon Frontier Markets Income Fund (NASDAQ:AGEYX)
This fund focuses its investing on countries and companies in frontier markets, which are usually smaller and less-developed markets that are at earlier stages of economic and financial development when compared to more mainstream emerging markets. Generally, the fund targets investments in sovereign and corporate debt in 45 to 65 frontier markets countries, as well as frontier market currencies.
Excluding approximately 6.5% of the fund’s assets that are cash, more than 90% of the fund’s assets comprise investments in government bonds. Investments in the Financial (5%), Industrial (1.7%) and Energy (1.2%) sectors round off all the segments that have more than 1% share of the assets. When combined, the sectors have more than 98% of the fund’s fixed income investments. With less than 1% of the fund’s assets each, Consumer Non-Cyclical, Basic Materials, Communications and Utilities contribute the remaining 2% share.
The fund had the largest exposure to investments in Egypt at 7%. With asset shares between 6.8% and 3.7%, Nigeria, Kenya , Ghana, the Ivory Coast, Ecuador, Sri Lanka, Ukraine and the Dominican Republic round out the top ten countries by asset share.
While the unit price has advanced only 2% over the trailing 12 months, the fund’s monthly distributions have combined to produce an annual $0.73 payout that corresponds to an 8.51% yield. The combined total return was 10.35% over the past 12 months and double that figure over the past three years.
5 High Dividend Mutual Funds for Your Portfolio: #3
State Street Aggregate Bond Index Fund – Class A (NASDAQ:SSFCX)
The State Street Aggregate Bond Index Fund seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Bloomberg Barclays U.S. Aggregate Bond Index that tracks the U.S. dollar-denominated investment grade bond market over the long term.
As of October 31, 2019, the State Street Aggregate Bond Index Fund had 3,425 individual holdings that comprised $4.2 million in total assets. The largest share of the fund’s assets, nearly 40%, is in treasury bonds. Mortgage-backed securities account for nearly 27% of total assets. Three different types of corporate bonds — Industrials at 15%, Financials at 8% and Utilities at 2% — cover another quarter of total assets.
Therefore, these top three classes of holdings — treasury bonds, mortgage-backed securities and corporate bonds — account for almost 90% of the fund’s total assets. Non-Corporate bonds, commercial mortgage-backed securities (CMBS), agency bonds and asset backed securities comprise the last 10% of the fund’s assets.
The fund’s current monthly distributions correspond to an $0.88 annualized payout and an 8.67% forward yield. After a 7% decline from 2015 through late 2018, the share price has fully recovered from those losses during the trailing 12 months. Consequently, the total returns over the past three and five years are just a few cents away from the 31.3% total return over the past year.
5 High Dividend Mutual Funds for Your Portfolio: #2
Real Estate Real Return Strategy Fund (NASDAQ:PETCX)
The Real Estate Real Return Strategy Fund seeks to capture the performance potential of real estate through derivative exposure to the broad-based Dow Jones U.S. Select Real Estate Investment Trust (REIT) Index. This exposure is collateralized with a portfolio of Treasury Inflation-Protected Securities (TIPS) that provide additional return and inflation hedging potential.
As of October 31, 2019, the fund’s 104 individual holdings combined for $1.26 billion in total assets. Aside from 14% of assets invested in diversified real estate opportunities, the fund has allocated more than one-fifth of its assets into residential apartments. An additional 12% of the fund’s assets is comprised of office real estate properties and 11% are in warehousing and industrial facilities. These top four categories account for nearly 60% of the fund’s total assets. All the remaining investment areas — Health Care, Storage, Manufactured Homes, Regional Malls, Hotels and Shopping Centers — contribute less than 10% each.
The fund has hiked its quarterly distributions more than 10-fold over the past four years. The fund’s current $0.62 annualized dividend distribution corresponds to an 8.87% forward dividend yield. Driven by the overall market correction, the unit price declined more than 10% in late 2018. However, the fund’s unit price has advanced nearly 19% year-to-date in 2019.
Over the past 12 months, the asset appreciation and dividend distributions have combined for a total return of 18%. The total return has exceeded 26% over the past three years.
5 High Dividend Mutual Funds for Your Portfolio: #1
Eaton Vance Emerging Markets Local Income Fund Class A (NASDAQ:EEIAX)
With access to locally denominated emerging market investments, this Fund provides exposure to the currencies and interest rates of developing countries. As of September 30, 2019, the fund’s holdings were comprised of securities from 39 countries and total assets was nearly $1.2 billion. Nearly 80% of these assets were represented in bonds. Of these bond assets, more than three-quarters were government bonds and just 1.7% were corporate bonds. Less than 0.2% represented derivatives and approximately 15% were held in cash.
The fund’s unit price lost nearly half of its value between mid-2013 and January 2016. After this steep drop, the share price declined a little more before reaching its all-time low of $5.25 in December 2018. However, 2019 saw a trend reversal and steady gains. Since bottoming out in late 2018, the unit price has advanced more than 10% before reaching its 52-week high of $52.81 at the end of October 2019.
The fund’s unit price gains and dividend distribution have combined for an 18% total return over the trailing 12-month period. Over the past three years, the fund has delivered a total return of nearly 25%.
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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.