5 Great Dividend Mutual Funds

by Dan Burrows | August 7, 2013 3:03 pm

ETF, portfolio, stocks, chart, planning[1]Heaven knows the market is fickle.

Value stocks will be delivering outsized returns one year, then suddenly, the market will be all about growth.

Whether it’s risk-on vs. risk-off, pro-cyclical sectors vs. defensive ones, growth at a reasonable price or growth at any price, no investing style works all of the time.

One thing long-term, patient investors know is that dividends never go out of style. Sure, capital appreciation is sexier, but for superior total returns over the long haul, you have to respect the power of dividends. Indeed, since 1926, dividends have represented over 50% of the market’s total return, according to research from BNY Mellon.

If you want the best of both worlds — capital appreciation and a cash stream — you should consider pursuing an equity-income strategy. A diversified portfolio of dividend-paying stocks not only delivers upside on price in bull markets, but the dividends help cushion the downside in bear markets, too.

True, you can find higher dividend yields in select stocks, but then total return is the name of the game when it comes to equity income — not to mention managing risk through a diversified portfolio.

With that in mind, we screened for great dividend-paying mutual funds — ones that, among other characteristics, had to be cheap, open to new investors for a few thousand bucks or less, and have a track record of market-beating total returns.

Here’s what we found:

Vanguard Equity Income Fund

Vanguard mutual funds 401(k)[2]Ticker: VEIPX[3]
Morningstar Rating: 5 stars
Minimum investment: $3,000
Expenses: 0.3%
Load: None
Yield: 2.7%
Performance Summary: Vanguard’s Equity Income Fund is just edging out the S&P 500’s 18.5% returns year-to-date, but is slightly behind the S&P’s 20.6% gains by a few basis points. However, over three, five and 10 years, VEIPX beat the broader mark by anywhere from 1.4 to 1.8 percentage points.
Notes: This large-cap value fund has roughly 85% of its portfolio invested in U.S. stocks, about 10% in foreign equities and the rest in cash. Top holdings include Exxon Mobil (XOM[4]), Johnson & Johnson (JNJ[5]) and Chevron (CVX[6]).

Nicholas Equity Income

Nicholas185[7]Ticker: NSEIX[8]
Morningstar Rating: 5 stars
Minimum investment: $500
Expenses: 0.75%
Load: None
Yield: 2.6%
Performance Summary: NSEIX is outdoing the S&P 500 by less than 1 percentage point in 2013, and by almost 3 percentage points in the past year.
Notes: A midcap fund blending both growth and value stocks, NSEIX has 87% of its portfolio invested in U.S. equities and 3.7% in foreign stocks. Top holdings include Walgreen (WAG[9]), Kinder Morgan Inc. (KMI[10]) and Tupperware (TUP[11]).

Ave Maria Rising Dividend Fund

AveMaria185[12]Ticker: AVEDX[13]
Morningstar Rating: 5 stars
Minimum investment: $1,000
Expenses: 0.99%
Load: None
Yield: 1.2%
Performance Summary: While the yield isn’t great by any means, it provides a little padding — padding it hasn’t needed of late. At +20%, AVEDX is beating the S&P 500’s total return by about 1 percentage point for the year-to-date. Its 52-week return of 22% is about 3 percentage points better.
Notes: This fund screens for investments that do not violate core teachings of the Catholic Church. Top holdings include Coach (COH[14]), Bank of New York Mellon (BK[15]) and Gentex (GNTX[16]).

Shelton Core Value Direct Fund

Shelton185[17]Ticker: EQTIX[18]
Morningstar Rating: 4 stars
Minimum investment: $1,000
Expenses: 0.88%
Load: None
Yield: 1.3%
Performance Summary: Like AVEDX, EQTIX is outperforming the S&P 500 recently — it’s up roughly 22% so far in 2013 and 24% in the past year.
Notes: This large-cap value fund is pretty America-centric, with 96% of its portfolio invested in U.S. stocks. Top holdings include Chevron, JPMorgan Chase (JPM[19]) and Apple (AAPL[20]).

Columbia Dividend Income Fund

columbia management[21]Ticker: GSFTX[22]
Morningstar Rating: 5 stars
Minimum investment: $2,000
Expenses: 0.75%
Load: None
Yield: 2.1%
Performance Summary: Columbia Dividend is actually lagging the S&P 500 by 1 percentage point this year and is only up 17% in the past 52 weeks. Longer-term, however, GSFTX beat the broader market by 0.84 points over five years and by 1.51 points in the past decade.
Notes: This large-cap value fund also is heavy in U.S. stock weightings, at 93% of its portfolio. Top holdings include Verizon (VZ[23]), Microsoft (MSFT[24]) and Pfizer (PFE[25]).

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

  1. [Image]: https://investorplace.com/wp-content/uploads/2013/03/fund185.jpg
  2. [Image]: https://investorplace.com/wp-content/uploads/2011/12/Vanguard.jpg
  3. VEIPX: http://studio-5.financialcontent.com/investplace/quote?Symbol=VEIPX
  4. XOM: http://studio-5.financialcontent.com/investplace/quote?Symbol=XOM
  5. JNJ: http://studio-5.financialcontent.com/investplace/quote?Symbol=JNJ
  6. CVX: http://studio-5.financialcontent.com/investplace/quote?Symbol=CVX
  7. [Image]: https://investorplace.com/wp-content/uploads/2013/08/Nicholas185.jpg
  8. NSEIX: http://studio-5.financialcontent.com/investplace/quote?Symbol=NSEIX
  9. WAG: http://studio-5.financialcontent.com/investplace/quote?Symbol=WAG
  10. KMI: http://studio-5.financialcontent.com/investplace/quote?Symbol=KMI
  11. TUP: http://studio-5.financialcontent.com/investplace/quote?Symbol=TUP
  12. [Image]: https://investorplace.com/wp-content/uploads/2013/08/AveMaria185.jpg
  13. AVEDX: http://studio-5.financialcontent.com/investplace/quote?Symbol=AVEDX
  14. COH: http://studio-5.financialcontent.com/investplace/quote?Symbol=COH
  15. BK: http://studio-5.financialcontent.com/investplace/quote?Symbol=BK
  16. GNTX: http://studio-5.financialcontent.com/investplace/quote?Symbol=GNTX
  17. [Image]: https://investorplace.com/wp-content/uploads/2013/08/Shelton185.jpg
  18. EQTIX: http://studio-5.financialcontent.com/investplace/quote?Symbol=EQTIX
  19. JPM: http://studio-5.financialcontent.com/investplace/quote?Symbol=JPM
  20. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  21. [Image]: https://investorplace.com/wp-content/uploads/2013/05/columbia-management.jpg
  22. GSFTX: http://studio-5.financialcontent.com/investplace/quote?Symbol=GSFTX
  23. VZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=VZ
  24. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  25. PFE: http://studio-5.financialcontent.com/investplace/quote?Symbol=PFE

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