6 Monthly Dividend Mutual Funds That Pay 5%-Plus to Buy Now
By: Olivia Faucher,
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 described below, 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 caused by a rapidly declining share price in advance of a dividend cut or elimination. Therefore, investors must consider additional metrics before deciding which dividend paying mutual funds 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%, the following mutual funds made the list because they have relatively low expense ratios, and they provide a reliable monthly dividend that has withstood the negative impacts of the recent financial crisis.
6 Monthly Dividend Mutual Funds That Pay 5%-Plus to Buy Now: #6
JP Morgan Income Fund Class I (NASDAQ: JMSIX)
Dividend Yield: 5.22%
JMSIX is a taxable bond mutual fund that invests opportunistically in a wide variety of debt securities that have high potential to produce attractive risk-adjusted income and have low correlations to each other. The fund tracks the Bloomberg Barclays U.S. Aggregate Index as its benchmark. The fund utilizes a flexible approach, allowing allocation shifts based on changing market conditions.
The fund primarily invests in US bonds, as US bonds make up 89.2% of the portfolio. The top three investment sectors are agency mortgage-backed securities, high yield corporate bonds, and commercial mortgage-backed securities. The fund’s $6.06 billion in total assets comprises 2,009 total holdings. The top ten holdings make up 10.29% of total assets.
JMSIX is currently paying out a monthly dividend of $0.039, which correlates to an annual payout of $0.468 and a dividend yield of 5.22%.
The current stock price of JMSIX is $9.51, with a net expense ratio of 0.42%. The stock price is in line with the recent trend, as the price has been in the $9 range for the past five years. Dividend distributions and asset appreciation have combined over the past five years to deliver a return of 13.95%.
6 Monthly Dividend Mutual Funds That Pay 5%-Plus to Buy Now: #5
Columbia Multi-Asset Income Fund Class A (NASDAQ: CLNAX)
Dividend Yield: 5.41%
CLNAX is an asset allocation mutual fund that invests in a diversified set of income-generating asset classes to offer multiple drivers of income and return. The fund adapts to changing market conditions in an attempt to generate attractive income while managing volatility and downside risk. The fund’s top assets are primarily made up of equity-linked notes, high-yield corporate bonds, and U.S. treasuries.
CLNAX holds $149 million in total net assets. The top ten holdings comprise 54.36% of the funds total of 796 holdings. An investor who wants to buy into this mutual fund must make a minimum investment of $2,000. The fund has a net expense ratio of .99%.
CLNAX began paying a monthly dividend upon its inception in March 2015 and has consistently paid a dividend ever since. The fund’s current annual payout of $0.50 correlates to a dividend yield of 5.41%. The fund has achieved dividend growth, with a 3-year dividend growth rate of 3.69%.
The current price per share of CLNAX is , which is in line with the 5-year trend that the fund price has followed. The price fell to a low point of $7.59 in March 2020 at the height of the financial crisis but has since recovered to land back in its consistent $9 range.
6 Monthly Dividend Mutual Funds That Pay 5%-Plus to Buy Now: #4
BlackRock Dynamic High Income Fund Class A (NASDAQ:BDHAX)
Dividend Yield: 5.58%
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 June 20, 2020, more than 1,600 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 BlackRock holds nearly 22% of its total assets and the underlying benchmark indices are below 2.5%.
Geographically, more than 67% of the BlackRock fund’s holdings are in North American securities. Emerging Markets represent the second-highest segment with nearly 16% of assets. Europe with nearly 10% of assets and Asia with approximately 3% complete the fund’s geographic allocations. The rest of the fund’s assets — approximately 4% — is in cash.
The fund’s monthly distribution amount corresponds to an annualized payout of $0.504, which is equivalent to a 5.58% dividend yield. In addition to monthly dividend payouts, the fund has provided total returns of 3.78% over the past five years.
After trading relatively flat for all of 2019, the share price dropped nearly 16% to $7.86 in a month during February and March of 2020 amid the financial crisis of the COVID-19 pandemic. Since then, the price has been steadily increasing to reach the current price of $10.31
5 Monthly Dividend Mutual Funds That Pay 5%-Plus to Buy Now: #3
Victory Floating Rate Fund Class Y (NASDAQ: RSFYX)
Dividend Yield: 6.3%
The investment seeks to provide a high level of current income. The fund normally invests at least 80% of its assets in floating rate loans and other floating-rate investments.
RSFYX currently has 123 holdings that total $492.49 million in net assets. The top ten holdings make up 13.42% of the portfolio. Currently, 79% of the portfolio is invested in bank loans, 15% in corporate bonds and the remaining 6% is in cash.
The fund pays out a monthly dividend of $0.042, resulting in an annual payout of $.504. This correlates to a current dividend yield of 5.7%. In addition to a reliable monthly dividend payout, the fund has delivered positive returns to its investors in the last eight out of ten years.
The mutual fund is currently trading at $9.38, which is lower than the high $9 range that the fund has been in for the past 5 years. Now could be an opportune time to buy RSFYX, while the share price is slightly depressed, as it may yield increased returns. The fund has an expense rate of 78%.
6 Monthly Dividend Mutual Funds That Pay 5%-Plus to Buy Now: #2
Barings Emerging Markets Debt Blended Total Return Fund Class Y (NASDAQ: BXEYX)
Dividend Yield: 6.34%
The Fund invests in debt securities, derivatives and other instruments that are economically tied to emerging market countries. Under normal market conditions, the fund will invest at least 80% of its net assets in securities, fixed income securities, or debt instruments of emerging market countries. The fund seeks to achieve maximum total return for its investors.
Currently, 81.68% of the portfolio is invested in foreign bonds, and the remaining amount is in cash. The fund has 282 holdings which contribute to its $54.39 million in net assets.
Since its inception in October 2015, the fund has delivered positive returns in 3 out of the 4 full years it has been in existence, boasting an average annual return of 11.95% over the past 4 years. Total returns for the trailing twelve months are reported at 12.63%.
BXEYX has a monthly payout of $.057, which correlates to an annualized payout of $.684 and a dividend yield of 6.34%. The price per share of BXEYX is currently $10.77, with a net expense ratio of .95%
5 Monthly Dividend Mutual Funds That Pay 5%-Plus to Buy Now: #1
PGIM High Yield Fund Class Z (NASDAQ: PHYZX)
Dividend Yield: 6.38%
This mutual fund seeks to maximize current income by investing primarily in high-yield bonds.
Capital growth is a secondary goal for the fund. The fund may be appropriate for investors willing to take on higher risk to achieve higher current income and potential capital appreciation.
The fund has 761 total holdings, totaling $17.318 billion in net assets. The top ten holdings make up 12.02% of the portfolio. The portfolio is primarily corporate bonds, with 85.8% of the holdings being corporate bonds.
The fund has been paying a monthly dividend since 1996. The current monthly dividend payout of $0.026 results in an annual payout of $0.312. In addition to the benefit of the reliable monthly dividend, the fund has provided an average annual return of 6.74% over the last ten years.
After hitting its 52-week high of $5.60 in January, the fund fell all the way down to $4.48 at the height of the financial crisis in March 2020. Since then, the fund has recovered to reach its current price of $5.57. The net expense ratio is .54%.
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Olivia Faucher is an investment writer intern at Eagle Financial Publications who writes for www.dividendinvestor.com.