5 Monthly Dividend Mutual Funds That Pay 5%-Plus to Buy Now
By: Ned Piplovic,
While exchange-traded funds (ETFs) continue gaining popularity, investors still seek diversification and steady income from other investment vehicles, like the five monthly dividend mutual funds, all of which yield more than 5%.
Still, investors must consider other financial measures, as high yields can be deceptive on their own. A high dividend yield could be merely a manifestation of a rapidly declining share price. Therefore, interested investors must consider additional metrics before deciding which mutual fund to add to their investment portfolio.
To ensure that a mutual fund or any other security offers capital gains and dividend income distributions, investors can simply use the total return over a set period. As long as the total return over the desired time period exceeds the dividend yield over the same period, the equity’s capital gains will be positive, and the equity is worth consideration for further analysis.
In addition to current yields of more than 5%, all five of the monthly dividend mutual funds to buy now on the list below have double-digit-percentage total returns over the past year. They also have total returns of more than 8% over the last year and double-digit-percentage total returns over the past three years.
Additionally, all five of the monthly dividend mutual funds on the list below have increased their total annual distribution for at least the last two years.
5 Monthly Dividend Mutual Funds That Pay 5%-Plus to Buy Now: #5
Payden High Income Fund (NASDAQ:PYHRX)
Dividend Yield: 5.34%
The Payden High Income Fund invests in corporate high-yield bonds, which provide a premium to U.S. Treasury bonds. The fund generally invests in the higher-quality segment of the market and looks for companies with good growth prospects, superior and defensible products and strong management teams. The fund attempts to mirror the composition and performance of the ICE BofAML US High Yield BB Total Return Index.
As of mid-November 2019, the fund had nearly $450 million in total assets spread across eight industry sectors. Consumer Goods and Energy account for nearly 45% of those assets. Adding holdings in Communications (15%) and Financials (12%) raises the combined share of the top four sectors to 70% of the fund’s assets.
The fund’s total annualized dividend distribution of $0.35 corresponds to a 5.34% forward dividend yield. After loosing nearly 10% of its value in 2018, the share price recovered all those losses and closed on November 13, 2019, at $6.55, which was 9.35% higher than the 52-week low of $5.99 in late-December 2018.
5 Monthly Dividend Mutual Funds That Pay 5%-Plus to Buy Now: #4
BlackRock Dynamic High Income Fund Class A (NASDAQ:BDHAX)
Dividend Yield: 5.91%
This fund seeks returns by tracking the makeup and performance of the MSCI World Index (70%) and the Bloomberg Barclays US Aggregate Bond Index (30%). As of October 31, 2019, more than 1,100 individual holdings made up the fund’s total assets of nearly $1.2 billion.
The BlackRock fund currently holds a larger share of funds in fixed income asset classes compared to its benchmark indices, which favor equities. The largest discrepancy is in the Non-U.S. Fixed income category where the BlackRock holds nearly 18% of its total assets and the underlying benchmark indices are below 2.5%.
Geographically, more than 70% of the BlackRock fund’s holdings are in North American securities. Emerging Markets represent the second highest segment with nearly 14% of assets. Europe with nearly 9% of assets and Asia with approximately 2.5% complete the fund’s geographic allocations. The rest of the fund’s assets — approximately 3% — is in cash.
The fund’s monthly distribution amount corresponds to an annualized payout of $0.57, which is equivalent to a 5.91% forward dividend yield. A steep share price rebound suppressed this current yield below the funds 6.25% five-year yield average.
After trading relatively flat during the first three-quarters in 2018, the share price dropped more than 12% in the last quarter of the year amid downward pressure from the overall market correction. After reaching its 52-week low of $8.47 on December 24, 2018, the share price reversed direction and recovered all those losses by the beginning of February 2019. The share price continued advancing and closed on November 12, 2019, at $9.65 for a 14% gain above the 52-week low.
The dividend payouts pushed the total returns to nearly 20% over the trailing 12 months. A substantial share price drop in 2015 and another decline during the first three quarters of 2018 limited total returns over the three-year period to 25% and just slightly above 26% over the last five years.
5 Monthly Dividend Mutual Funds That Pay 5%-Plus to Buy Now: #3
PGIM Global Dynamic Bond Fund Class R6 (NASDAQ:PAJQX)
Dividend Yield: 6.12%
This fund seeks returns by investing in a variety of bonds across global markets. As of September 30, 2019, the fund had $64 million in total assets spread across approximately 1,600 holdings. Bonds represent more than three-quarters of total assets. Less than 0.25% of assets are in stocks, cash represents slightly more than 4% and various other asset classes account for the remaining fifth of the holdings.
The fund’s current monthly distribution corresponds to a $0.64 annualized payout. This payout is equivalent to a 6.12% forward dividend yield. Since inception in late 2015, the fund had boosted its annual distribution every year. Over the past four years, the fund enhanced its annual payout 67%, or at an average growth rate of 13.6% per year.
After declining more than 2.4% in the last quarter of 2018, the share price hit its 52-week low of $9.69 on December 26, 2018. However, the share price recovered in 2019 and rose nearly 8% above this low before reaching its 52-week high of $10.52 on October 25, 2019.
Since the October peak, the share price pulled back 0.7% to close on November 12, 2019, at $10.45, which was 4.7% higher than 12 months earlier. The combined benefit of asset appreciation and dividend distributions delivered a total gain of more than 12% over the trailing 12 months and nearly 30% over the last three years.
5 Monthly Dividend Mutual Funds That Pay 5%-Plus to Buy Now: #2
PIMCO Emerging Markets Local Currency and Bond Fund (NASDAQ:PELBX)
Dividend Yield: 6.20%
The fund uses the JPMorgan Government Bond Index-Emerging Markets Global Diversified Index as its benchmark to seek higher yields and currency appreciation through an actively managed portfolio of local currency-denominated emerging markets debt.
As of October 31, 2019, with an 11% share each, the top three countries — Indonesia, Mexico and Brazil – accounted for nearly one-third of the funds $1.83 billion in total assets. Securities from Thailand, Russia, Poland, Colombia, South Africa and Malaysia accounted for the remaining two-thirds of the fund’s assets.
Nearly 70% of the bonds have maturities between three and 10 years. With the addition of bonds maturing between 10 and 20 years, more than 95% of the fund’s holdings have mature between three and 20 years, with an average maturity of 6.75 years.
Over the past year, the fund’s unit price advanced 8% to close at the end of trading on November 13, 2019, at $6.92. The funds monthly distributions correspond to an annualized $0.43 payout, which is equivalent to a 6.2% forward dividend yield.
Dividend distributions and asset appreciation combined over the past year to deliver a total return of 14.3%. The share price lost nearly half of its value between mid-2013 and the beginning of 2016, which limited the total return to less than 1% over the past five years. However, the three-year total return is approaching 20%.
5 Monthly Dividend Mutual Funds That Pay 5%-Plus to Buy Now: #1
State Street Aggregate Bond Index Fund – Class A (NASDAQ:SSFCX)
Dividend Yield: 8.73%
The State Street Aggregate Bond Index Fund generally seeks to mirror the price and yield performance of the Bloomberg Barclays US Aggregate Bond Index, which tracks the U.S. dollar denominated investment grade bond market over the long term. AS of September 30, 2019, the fund’s total assets of more than $4 million comprised of nearly 3,400 individual bonds.
However, nearly 90% of all assets reside in just four sectors — United States Treasuries (39.8%), Mortgage Backed Securities (26.7%), Industrial Sector Corporate Bonds (15.3%) and Financial Sector Corporate Bonds (8%).
The fund’s current annualized monthly distribution of $0.88 corresponds 8.73% forward dividend yield. Despite a share price surge over the past year, the current yield is 34% higher than the fund’s own average yield of 6.52% over the past five years.
Before the current surge, the share price experienced moderate volatility but followed a general downtrend since the fund’s inception in September 2014. After losing 7.2% of its initial value, the share price reached its all-time low of $9.33 on October 29, 2018. Since bottoming out in late-October 2018, the share price has recovered all its losses and closed at $10.08 at the end of trading on November 12, 2019.
The investors received a total return of more than 30% over the trailing 12-month period. The share price decline from 2015 to late 2018 held the tree-year total return below 28%. The five-year total return exceeded 32%.
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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.