5 Mid-Cap Mutual Funds to Buy for Income

These dividend funds offer income and mid-cap equity exposure.

By Todd Shriber, InvestorPlace Contributor

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mid-cap stocks

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Although the Federal Reserve has raised interest rates three times this year with market observers widely expecting a fourth rate hike in December, domestic dividend growth remains impressive.

During the first nine months of 2018, there were 291 dividend increases by S&P 500 constituents, including 75 which occurred in the third quarter,” according to CFRA Research.

Oft-overlooked by investors of all stripes, mid-cap stocks are credible income destinations. Additionally, over long holding periods, mid-cap stocks offer the potential to outperform larger stocks with less volatility than small-cap names.

In the world of mid-cap mutual funds to buy, some are dedicated dividend funds while other mid-cap dividend plays come by way of value mutual funds.

Here are 5 mid-cap mutual funds to buy for income investors: 

Vanguard Mid-Cap Value Index Fund Investor Shares (VMVIX)

Expense ratio: 0.19% per year, or $19 on a $10,000 investment.

The Vanguard Mid-Cap Value Index Fund Investor Shares (MUTF:VMVIX) is an index fund, not an actively-managed mutual fund to buy, but is one of the more cost-effective options in the mid-cap fund category. The investor shares class of this well-known mutual fund to buy require a minimum investment of $3,000. VMVIX has credibility as a dividend fund due to its value characteristics.

Value stocks are those that may be temporarily undervalued by investors. These companies typically grow at a slower pace than the broader group of mid-sized companies,” according to Vanguard.

This dividend fund holds 205 stocks with a median market value of $13.6 billion, which is actually large-cap territory. VMVIX allocates over 24% of its weight to financial services stocks while the consumer discretionary and staples sectors combine for 26.70% of the fund’s weight.

Chartwell Mid Cap Value Fund (BERCX)

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Expense ratio: 1.06% per year, or $106 on a $10,000 investment.

Over the past three years, the Chartwell Mid Cap Value Fund (MUTF:BERCX) is one of the better-performing funds in the Morningstar mid-cap value category. This dividend fund has a minimum investment of $1,000.

For this mutual fund to buy, Chartwell’s management team focuses on “companies with market capitalizations that are mid-cap in size and that exhibit strong growth, profitability, and financial strength characteristics,” according to the firm.

This dividend fund is a concentrated offering with just 35 holdings as of the end of the third quarter. Financial services names represent 18% of the fund’s roster while industrials and real estate investment trusts (REITs) combine for 26%.

Keeley Mid Cap Dividend Value Fund (KMDVX)

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Expense ratio: 1.20% per year, or $120 on a $10,000 investment.

For the Keeley Mid Cap Dividend Value Fund (MUTF:KMDVX), I’ll be highlighting the investor class shares. This dividend fund carries a four-star rating from Morningstar and is one of the more solid mutual funds to buy in the mid-cap value category.

The Fund seeks long-term capital appreciation and current income through investments in equity securities of companies with a mid-sized market capitalization and that currently pay, or are reasonably expected to pay dividends to shareholders,” according to Keeley Funds.

At the end of Q3, this dividend fund’s top 10 holdings combined for 20.77% of the fund’s weight. At that time, KMDVX was overweight utilities and financial stocks, among other sectors, while being underweight technology and consumer staples names.

WisdomTree U.S. MidCap Dividend Fund (DON)

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Expense ratio: 0.38% per year, or $38 on a $10,000 investment.

This dividend fund is not a mutual fund to buy, but it is an ETF to buy. The WisdomTree U.S. MidCap Dividend Fund (NYSEARCA:DON) is the ETF that leads the mid-cap dividend ETF pack. More importantly, this mid-cap dividend fund is, over the long-term, one of the best-performing dividend funds in the mid-cap category, including actively and passively managed funds.

DON, which is over 12 years old, targets the dividend-weighted WisdomTree U.S. MidCap Dividend Index. That index is currently sporting some compelling traits, particularly when factoring in share buybacks.

While strictly looking at the latest dividend yields would show the current dividend yield of many mid-cap indexes below their average yields since 2006, when factoring in the trend for buybacks, the combined dividend and net buyback ratio for the WisdomTree U.S. MidCap Dividend Index — and, in fact, other traditional market cap indexes—is currently above their averages since 2006,” said WisdomTree in a recent note. “This shows price appreciation over the last decade has been driven, in large part, by strong growth in both dividends and buybacks across the various mid-cap benchmarks.”

This dividend fund holds nearly 400 mid-cap stocks, over 37% of which hail from the consumer discretionary and real estate sectors.

Fidelity Mid-Cap Value Fund (FSMVX)

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Expense ratio: 0.69% per year, or $69 on a $10,000 investment.

Thanks to recent investor-friendly moves by Fidelity, the Fidelity Mid-Cap Value Fund (MUTF:FSMVXdoes not have a minimum investment requirement. FSMVX confines its selection to stocks with market values of $2 billion to $10 billion, which is proper mid-cap territory. The fund looks to top value derivatives of the S&P MidCap 400 Index and the Russell Mid-Cap Value Index.

This Fidelity dividend fund is overweight the financial services, real estate, industrial and technology sectors relative to the Russell Mid-Cap Value benchmark. FSMVX’s top 10 holdings combine for just over 18% of the mid-cap fund’s weight.

Our long-term focus on buying strong franchises when they’re temporarily out of favor with investors — in other words, our focus on quality and value — hindered relative performance this quarter,” said Fidelity. “In addition, we continued to rely on a blend of proprietary quantitative resources and fundamental analysis to drive long-term outperformance. However, the factors in our quantitative model — which includes a wide range of measures, such as capital allocation and quality — generally detracted this three-month period.”

Todd Shriber does not own any of the aforementioned securities.


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