Although exchange-traded funds (ETFs) are gaining popularity as the new investment of choice for income investors seeking easy diversification, the following five high dividend mutual funds for your portfolio can provide steady returns.
Investors can seek out high dividend mutual funds that offer robust asset appreciation and steady dividend distributions to maximize one’s total returns in the long run. The following list contains five high dividend mutual funds with yields exceeding 5%.
Prior to the COVID-19 market crash, all five funds gave investors double-digit-percentage gains for the trailing 12-month period and 15%-plus total returns for the past three years. Furthermore, three of the five mutual funds had gained at least 20% over the past five years. All five mutual funds are well on their way to recovery and have boosted their annual dividend distributions in between the last two to four consecutive years.
The Cohen & Steers Global Realty Shares fund invests its total assets in common stocks and other equity securities issued by global real estate companies, including real estate investment trusts and similar investment vehicles. Under normal market conditions, the fund targets investing at least 40% of its assets in foreign companies, as well as companies that conduct a significant share of their business outside the United States. In distressed global markets, such as the current global economic downturn triggered by the COVID-19 virus outbreak, the fund would reduce its foreign market exposure to at least 30%.
Most recently, the fund allocated $1.16 billion in assets across 81 individual holdings. Comprising 6.49%, Prologis, Inc. (NYSE:PLD) was the top holding and the only individual stock that accounted for more than 5% of the fund’s assets. All other holdings contributed individually by 5.0% or less. The top 10 holdings accounted for 35% of the fund’s total assets and consisted of all domestic U.S. equities.
The fund has enhanced its annual dividend distribution payout four-fold over a five-year period. This rapid growth corresponds to the current annual dividend growth rate of nearly 185%. It has an estimated $2.41 annual dividend distribution and a dividend yield of 4.76%. This current yield is slightly higher than the fund’s own 4.58% five-year dividend yield average.
However, due to the impact of COVID-19, this fund presented a total loss of 5.56%. Looking beyond this market downturn, the fund was able to deliver total returns of 9% and 31% over the last three and five years, respectively.
5 High Dividend Mutual Funds for Your Portfolio: #4
This fund invests in bonds representing a variety of securities and instruments. Under normal market conditions, the fund invests at least 80% of its assets in fixed-income securities. The fund targets to invest at least 40% of its net assets in foreign securities.
As of August 31, 2020, the fund’s underlying holdings consisted of 447 bonds, one equity and 1,525 other holdings. More than 50% of the holdings carried Standard & Poor’s midrange grades between BB and A.
Since its inception in 2015, the fund has maintained consecutive annual dividend distribution and currently has an annual dividend growth rate of 74%. This advancement spreads out to its annual dividend growth rate of nearly 24% over three years. The fund’s annualized dividend payout of $0.46 converts to a 4.77% yield, which is slightly lower than the fund’s own average dividend yield of 6.16% for the past five years.
After briefly hitting its new all-time high in mid-December 2019, the share price has recovered 25% from the sharp drop on March 23, due to the COVID-19-induced market crash, to recover its total loss of 0.04% over the trailing 12 months. While relatively low, this asset appreciation was able to produce total returns of more than 13% during the last three years.
5 High Dividend Mutual Funds for Your Portfolio: #3
The Astor Macro Alternative Fund seeks to achieve its growth by investing primarily in exchange-traded funds (ETFs). The fund uses multiple quantitative strategies over a broad variety of asset classes and countries to generate high risk-adjusted returns with lower volatility than the global equity markets.
Three out of the fund’s 20 holdings — iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT), 36.06%; Invesco QQQ Trust (NASDAQ:QQQ), 22.84% and iShares Short Treasury Bond ETF (NYSE:SHV), 15.80% — account for more than 70% of total assets. The top eight holdings accounted for more than 97% of the fund’s assets. While underlying holdings originated from 10 different countries, around 27% of assets were from equities based in the United States.
The fund’s annualized dividend distribution of $0.64 is equivalent to a 5.14% forward dividend yield. Asset appreciation, combined with dividend distributions, has awarded investors a total return of 8.55% during the trailing 12 months and total returns of nearly 31% for the last three years and 47% for the last five years.
The AB (AllianceBernstein) Total Return Bond Portfolio seeks to deliver gains through a core fixed-income strategy with a global, multi-sector approach. While the fund targets primarily investment-grade bonds, it might allocate up to 25% of its assets into below-investment-grade bonds. The fund seeks investments with a range of maturities.
The fund has nearly $367 million in total net assets distributed across over 690 holdings. The top three bond sectors — government bonds with 49.90%, securitized bonds with 22.77% and corporate bonds with 13.5% — accounted for 86% of the fund’s total assets. More than 40% of total assets were allocated into equities with Standard & Poor’s AAA grade. The fund allows up to 25% of assets to be allocated in below-investment-grade bonds. Currently, nearly 82% of assets consist of investment-grade bonds with a Standard & Poor’s grade of BBB or higher.
The fund’s declared $0.64 annualized dividend distribution is equivalent to a 5.52% dividend yield, which is 52% higher than the fund’s own 3.64% five-year average yield. Prior to the COVID-19-induced market crash in March, the fund claimed continuous records of growth. It has since recovered 14%. Asset appreciation and the dividend income distributions have rewarded investors with a combined total return of over 9.25% over the past 12 months, as well as total returns of 16% and 24% over the past three and five years, respectively.
The PIMCO Real Estate Real Return Strategy Fund seeks to use derivative exposure to capture the performance potential of the 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.
The fund’s 562 individual holdings combine for $1.13 billion in total assets. Of its 632 holdings, bonds account for over 50%, and the fund’s top 10 holdings all comprise bonds. Its top 3 holdings — Irs Usd 1.25000 06/17/20-1y (Wht) Cme with 38.36%, Irs Usd 1.50000 03/12/20-1y (Wht) Cme with 38.34% and Dwrtft Trs Equity 1ml+28 *Bullet* Brc with 29.26% — account for over 100% of its assets’ earnings. This is because the fund includes negative assets in other holdings.
The fund has hiked its quarterly distributions more than 35-fold over the past four years, which corresponds to a 226% three-year dividend growth rate. The fund’s current $0.44 annualized dividend distribution is equivalent to a 7.39% dividend yield.
Due to the overall market decline, the share price is 17% lower than it was one year earlier and there was an 8.76% total loss in the trailing 12-month period. However, looking at a total return of 2% over the last three years and 25% over the last five years, its performance balances to positive total returns to stockholders, despite market volatility.
The five high dividend mutual funds for your portfolio offer a handful of opportunities for consistent income and potential share price gains.
Katie Kao is an editorial intern with Eagle Financial Publications.
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