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 4.5%. Additionally, all five funds have rewarded investors with double-digit-percentage gains over the trailing 12-month period and 15%-plus total returns over the past three years. Furthermore, the three mutual funds that have been in existence that long have gained at least 20% over the past five years. Also, all five mutual funds below have boosted their annual dividend distributions between two and four consecutive years.
5 High Dividend Mutual Funds for Your Portfolio: #5
Cohen & Steers Global Realty Shares – Class A (NASDAQ:CSFAX)
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 and companies conducting 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 reduces the foreign markets exposure to at least 30%.
As of December 31, 2019, the fund allocated more than $1.6 billion in assets across 89 individual holdings. At 4.6% share, Prologis, Inc. (NYSE:PLD) was the top holding and the only individual stock that accounted for more than 4% of the fund’s assets. All other holdings contributed individually 3.8% or less. The top 10 holdings accounted for more than 28% of the fund’s total assets and included only one foreign equity — Japanese real estate company Mitsui Fudosan Co., Ltd. (JPX:8801.T).
The fund enhanced its annual dividend distribution payout four-fold over a five-year period. This rapid growth corresponds to an average dividend growth rate of nearly 32% per year. The current $2.44 annualized dividend income distribution yields 4.25%. Despite the dividend growth, this current yield is slightly lower than the funds own 4.56% five-year dividend yield average.
However, that is a positive indicator. A combination of a falling dividend yield and rising dividend income payouts is an indication that asset appreciation has outpaced dividend growth, which generally delivers strong total returns. Just over the trailing 12 months, this fund rewarded shareholders with total returns of nearly 13%. Furthermore, the fund also delivered total returns of 28% and 31% over the last three and five years, respectively.
5 High Dividend Mutual Funds for Your Portfolio: #4
PGIM Global Dynamic Bond Fund (NASDAQ:PAJAX)
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 invests at least 40% of its net assets in foreign securities.
As of January 31, 2020, the fund’s underlying holdings comprised 577 bonds, four equities and more than 1,600 other holdings. More than 60% of the holdings carried Standard & Poor’s midrange grades between BB and A.
Since its inception in 2015, the fund has enhanced its annual dividend distribution 127%. This advancement corresponds to an average dividend growth rate of nearly 23% per year. The funds annualized dividend payout of $0.928 converts to a 5.43% yield, which is in line with fund’s own yield average over the past five years.
After briefly hitting its new all-time high in mid-December 2019, the share price delivered gains of 2.7% over the trailing 12 months. While relatively low, this asset appreciation contributed nearly one quarter of the funds 11.4% total one-year returns. The total returns topped 25% over the last three years and exceeded 33% since the fund’s inception in late 2015.
5 High Dividend Mutual Funds for Your Portfolio: #3
AB Total Return Bond Portfolio (NASDAQ:ABQIX)
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, the fund might allocate up to 25% of its assets into below-investment grade bonds. Furthermore, the fund seeks investments with a range of maturities.
As of January 31, 2020, the fund had nearly $94 billion in total net assets distributed across 591 individual holdings. The top three equity categories — commercial mortgage-backed securities with 19.03%, corporate investment grade bonds with 18.95% and mortgage pass-throughs with 18.30% — accounted for more than half of the fund’s total assets. More than half of 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. However, currently, nearly 90% of assets comprise of investment-grade bonds with a Standard & Poor’s grade of BBB or higher.
The fund’s current $0.66 annualized dividend distribution is equivalent to a 5.68% dividend yield, which is 55% higher than the funds own 3.65% five-year average yield. The fund’s share price advanced 6.7% over the trailing 12 months. Furthermore, the share price continues to appreciate despite the overall market pullback this week. After claiming a 52-week high on Monday, the share price set another new 52-week high yesterday. The asset appreciation and the dividend income distributions rewarded investors with a combined total return of nearly 13% over the past year, as well as total returns of 17% and 20% over the past three and five years, respectively.
5 High Dividend Mutual Funds for Your Portfolio: #2
Astor Macro Alternative Fund (NASDAQ:GBLMX)
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.
As of December 31, 2019, just three out of the fund’s 20 holdings — Invesco QQQ Trust (NASDAQ:QQQ) with 33.4%, iShares Edge MSCI Min Vol USA ETF (BATS:USMV) with 15.7% and iShares Long-Term Corporate Bond ETF (NYSE:IGLB) with 10% — accounted for 60% of total assets. The top 10 holdings accounted for more than 90% of the Fund’s assets. While underlying holdings originated from 10 different countries, nearly 85% of assets were from equities based in the United States. All other countries represented less than 2.5% of total assets. Through the underlying ETFs, approximately two thirds of assets were invested in stocks and nearly 20% in bonds.
The fund’s most recent annualized dividend distribution of $0.65 is equivalent to a 5.9% forward dividend yield. A significant dividend spike in 2019 pushed the current yield 67% higher than the fund’s own 3.51% average yield over the past five years.
Even after pulling back more than 8% from its $12.26 52-week high in September 2019, the share price still gained more than 4.5% over the trailing 12 months as of the end of trading on February 25, 2020. This asset appreciation combined with dividend income for a total return of 14.5% over the last year and nearly 27% over the last three years.
5 High Dividend Mutual Funds for Your Portfolio: #1
PIMCO Real Estate Real Return Strategy Fund (NASDAQ:PETCX)
The PIMCO Real Estate Real Return Strategy Fund seeks to capture the performance potential through derivative exposure to 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.
As of January 31, 2020, the fund’s 104 individual holdings combined for $1.17 billion in total assets. Aside from 14% of assets invested in diversified real estate opportunities, the fund has allocated nearly 23% of its assets into residential apartments. An additional 12.4% of the fund’s assets comprises warehousing and industrial facilities. Additionally, office real estate properties account for more than 10% of net assets. These top four categories combine 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 35-fold over the past four years, which corresponds to an average growth rate of 144% per year. The fund’s current $0.67 annualized dividend distribution is equivalent to a 9.32% forward dividend yield.
Even after two days of pullbacks driven by the overall market decline, the share price is still 5.75% higher than it was one year earlier. This asset appreciation and dividend distributions have combined for a total return of nearly 14.5%. The total return over the past three years was nearly 20% and almost 28% over the last five years.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
