7 Best High-Dividend Mutual Funds | Investing

The bull market continues to run in 2024, but longtime investors know it’s important to avoid the temptation to put all your eggs in one basket.

A diversified approach that includes value-oriented income stocks and bond holdings will help smooth out any potential bumps in the road, even if these assets have generally underperformed in the last few months.

If you’re an investor as concerned with big dividends as you are with the hyped-up headlines about artificial intelligence and tech stocks, then consider one of the seven top high-dividend mutual funds.

All of the below funds offer rock-bottom investment minimums, affordable annual expenses and well-established operations with more than $1 billion in assets under management.

They also have a minimum yield of 3%, with the most generous income investment offering a yield north of 8%.

Fund Expense Ratio 30-day SEC Yield
Fidelity Real Estate Income Fund (ticker: FRIFX) 0.68% 5.8%
American Funds Conservative Growth and Income Portfolio (INPFX) 0.65% 3.6%
American Funds Capital Income Builder (CIBFX) 0.66% 3.4%
JPMorgan Equity Premium Income Fund (JEPAX) 0.85% 6%
Fidelity Floating Rate High Income Fund (FFRHX) 0.72% 8.8%
Baird Intermediate Bond Fund (BIMSX) 0.55% 4.2%
PGIM High Yield Fund (PBHAX) 0.75% 7.2%

Fidelity Real Estate Income Fund (FRIFX)

Assets under management, or AUM: $4.6 billion
30-day SEC yield: 5.8%
Expense ratio: 0.68%, or $68 annually per $10,000 invested

FRIFX is a sector-focused fund from Fidelity that holds real estate investment trusts, or REITs. Top holdings include all manner of real estate holdings such as telecom firm American Tower Corp. (AMT) and warehouse operator Prologis Inc. (PLD), along with commercial real estate and housing firms that may be more intuitive to the typical investor. There are other stock-oriented mutual funds out there, but the vast majority don’t offer a significant payday or have as established an asset pool as this fund.

American Funds Conservative Growth and Income Portfolio (INPFX)

AUM: $7.4 billion
30-day SEC yield: 3.6%
Expense ratio: 0.65%

A “fund of funds” that owns a bunch of targeted mutual funds to make up a unique and comprehensive portfolio, INPFX is built with about 45% of the portfolio in bonds and 55% of the portfolio in stocks. As a result, this American Funds offering allows investors to gain a foothold in equity markets but boost their income potential to a much higher level. It’s also worth noting that those breakdowns also include foreign stocks and bonds in each tranche, which is part of the reason the yield is elevated above some domestic-only funds. With a reasonably affordable expense ratio but a broad mandate to find yield in all corners of the market, this is a simple one-stop fund for investors who want low-risk income potential from their funds.

American Funds Capital Income Builder (CIBFX)

AUM: $104 billion
30-day SEC yield: 3.4%
Expense ratio: 0.66%

If you want a mutual fund that’s a bit less conservative than the prior offering, this sister product from American Funds takes a bit more aggressive allocation with about 40% domestic stocks and 35% foreign stocks to rely less on bonds and more on equity markets. Top holdings aren’t the typical large caps, either, with chipmaker Broadcom Inc. (AVGO) and tobacco giant Philip Morris International Inc. (PM) at the top of the list. Though the yield is lower than some of the other picks here, it does provide a comprehensive investment that covers potential upside in stocks through the majority of its portfolio as well as the low-risk income generation of the bond market in the remaining 25% or so of its holdings.

JPMorgan Equity Premium Income Fund (JEPAX)

AUM: $6.2 billion
30-day SEC yield: 6%
Expense ratio: 0.85%

This fund takes a unique approach to income investing, relying on an options strategy known as “covered calls” to delivers high income and reduce downside risk in your stock holdings. If you’re unfamiliar with this approach, it involves holding stock but then selling options contracts against those holdings. The good news is that the sale of those contracts provides a steady stream of cash from stocks like Amazon.com Inc. (AMZN) that may not pay a penny in dividends normally. The bad news is that it can cap your upside versus owning the stock free and clear, as what you’re paid for is the option for someone else to buy at a fixed price that may wind up much lower than what the company eventually achieves. For this reason, JEPAX has underperformed the market considerably, with only a 17% return in the last 12 months. The supersized yield may make up for that in the eyes of income-oriented investors, however.

Fidelity Floating Rate High Income Fund (FFRHX)

AUM: $13.5 billion
30-day SEC yield: 8.8%
Expense ratio: 0.72%

The first bond-only fund on our list of the best high-dividend mutual funds, FFRHX is a doozy with an amazing yield that is more than five times the payday of the typical stock in the S&P 500. It achieves this income potential by focusing on “floating-rate” debt. As the name implies, these loans are provided to corporations under an agreement that the underlying interest rate increases as the overall marketplace changes. And given the steady and significant rate hikes from the U.S. Federal Reserve over the last few years, the loans in this Fidelity fund have been paying more and more lately. One thing to keep in mind, however, is that if rates roll back – as some expect in the next year or two – the yield of FFRHX will fall in kind.

Baird Intermediate Bond Fund (BIMSX)

AUM: $8.8 billion
30-day SEC yield: 4.2%
Expense ratio: 0.55%

Though on the lower end of yields, BIMSX is worth a mention because it’s more affordable than some of the other options and because its approach to the bond market provides a “Goldilocks” mix that may be attractive to risk-averse investors. As mentioned previously, interest rate increases have caused a lot of changes lately – including causing volatility in the bond market. This Baird fund has been able to navigate that in part because it looks at durations that are in the middle, with an average maturity of just under four years compared with other funds that are longer than six years, as well as a significant share of investment-grade bonds that are BBB-rated – on the border between the most creditworthy issuances and “junk” status. Baird’s tactical approach layers in responsible risk-taking that can maximize yield and minimize volatility, which could give investors peace of mind in a changing interest rate environment.

PGIM High Yield Fund (PBHAX)

AUM: $18.3 billion
30-day SEC yield: 7.2%
Expense ratio: 0.75%

A high-dividend mutual fund that is mostly focused on high-yield, or “junk,” bonds, this PGIM product has about 730 individual bond positions. These include debt from less-than-stellar corporations such as second-tier telecom Dish DBS Corp. and embattled aerospace stock Boeing Co. (BA), among others. There’s more risk in tying yourself to companies like this, but the deep portfolio provides some diversification. And of course, there’s the potential for strong income as long as the borrowers manage to pay interest on that debt that currently adds up to more than four times the yield of the S&P 500 at present. The risk profile is higher than other bond funds, but investors pursuing bigger yields may still find it worth a look.

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