Some investors think the universe of investment products begins and ends with exchange-traded funds, or ETFs. But traditional mutual funds still have a lot to offer — particularly the high-dividend mutual funds that provide diversification as well as consistent yield.
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Also, the old perception of dividend stocks has gone out the window in the current interest rate environment. That means investors may want to get more selective and look beyond the usual suspects to find better income alternatives wherever they can.
That’s where the following high-dividend mutual funds come in. If you have a minimum of $5,000, you can buy into any of these options — and for a few funds on this list, you can invest as little as you like with no formal minimum. Whatever you choose, all are multibillion-dollar mutual funds with yields of at least 4.7% based on the last 30 days of distributions.
| Mutual Fund | Expense Ratio | 30-day SEC Yield |
| JPMorgan Equity Premium Income Fund (ticker: JEPAX) | 0.85% | 7.4% |
| Vanguard Wellesley Income Fund Investor Shares (VWINX) | 0.23% | 4.7% |
| Fidelity Investment Grade Bond Fund (FBNDX) | 0.45% | 5.5% |
| Fidelity Total Bond Fund (FTBFX) | 0.45% | 5.9% |
| BBH Limited Duration Fund Class N (BBBMX) | 0.35% | 5.8% |
| Vanguard High-Yield Corporate Fund Investor Shares (VWEHX) | 0.23% | 7.6% |
| Fidelity Inflation-Protected Bond Index Fund (FIPDX) | 0.05% | 7.7% |
JPMorgan Equity Premium Income Fund (JEPAX)
Expense ratio: 0.85%, or $85 annually per $10,000 invested Minimum investment: $1,000 30-day yield: 7.4%
Though the priciest high-dividend mutual fund on this list, the big-time yield of JEPAX makes it worth a look for investors trying to build a defensive equity portfolio that still throws off a lot of income through both traditional corporate dividends and sophisticated options strategies. For instance, top holdings include Amazon.com Inc. (AMZN) — a stock that doesn’t pay a conventional dividend. However, through call options, this fund can still produce regular income for shareholders. You pay a premium expense ratio for that active and tactical approach, but the unique strategy is worth considering.
Vanguard Wellesley Income Fund Investor Shares (VWINX)
Expense ratio: 0.23% Minimum investment: $3,000 30-day yield: 4.7%
With more than 40 years of operating history, this storied Vanguard mutual fund offers an income-oriented approach via balanced exposure to stocks and investment-grade bonds. It’s heavier on the latter asset class, allocating about one-third to stocks and two-thirds to bonds, with a targeted list of only about 70 total equities, including megabank JPMorgan Chase & Co. (JPM) and Big Pharma icons Pfizer Inc. (PFE) and Merck & Co. (MRK). As for the bond part of the portfolio, there are investment-grade corporate bonds as well as U.S. Treasury bonds. If you’re looking beyond the typical index funds that are out there, this is an affordable way to invest with an eye toward dividends across asset classes.
Fidelity Investment Grade Bond Fund (FBNDX)
Expense ratio: 0.45% Minimum investment: $0 30-day yield: 5.5%
If you’re looking for a broad-based bond investment, FBNDX is among the best high-dividend mutual funds to buy now. It has no transaction fees or investment minimums and is well established, with about $8 billion in total assets under management. With a mix of about 45% U.S. Treasurys, 30% investment-grade corporate debt and 25% “agency” mortgage debt from entities like Fannie Mae and Freddie Mac, you get a diversified take on the bond market in a simple and reasonably priced package.
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Fidelity Total Bond Fund (FTBFX)
Expense ratio: 0.45% Minimum investment: $0 30-day yield: 5.9%
This nearly $31 billion fund is a simple, one-stop shop to diversify beyond investment-grade bonds into the entirety of the fixed-income universe. A massive portfolio of more than 6,500 different debt securities includes Treasurys and top-rated corporate debt as well as international offerings, junk bonds from distressed companies and everything in between. There’s elevated risk in some of these items by themselves, but the broad-based approach helps smooth out the bumps in the road — and provides an attractive yield you can rely on.
BBH Limited Duration Fund Class N (BBBMX)
Expense ratio: 0.35% Minimum investment: $5,000 30-day yield: 5.8%
This fund has an effective duration of just under one year, keeping you in bonds that will roll off the portfolio quickly. In this high-interest-rate environment, holdings are steadily replaced by more recently minted debt with a better payout. It’s also “unconstrained,” meaning its 400 or so positions span everything from U.S. Treasury bonds to corporate debt to international offerings. Though you may not be very familiar with the BBH brand, which is short for the firm’s roots as Brown Brothers Harriman, Morningstar investment analysts give this high-dividend mutual fund five stars. And with $7 billion in total assets under management, investors clearly find BBBMX appealing.
Vanguard High-Yield Corporate Fund Investor Shares (VWEHX)
Expense ratio: 0.23% Minimum investment: $3,000 30-day yield: 7.6%
Another high-dividend mutual fund that has a more tactical approach is this $22 billion Vanguard mutual fund. The fund has about 800 holdings that include less-than-stellar corporations that have to pay investors a premium for any loans. There’s more risk in tying yourself to this portfolio that’s invested in companies like equipment rental firm Herc Holdings Inc. (HRI) or cruise company Carnival Corp. (CCL). But based on the tremendous yield, there’s also the potential for strong income as long as the borrowers manage to get by.
Fidelity Inflation-Protected Bond Index Fund (FIPDX)
Expense ratio: 0.05% Minimum investment: $0 30-day yield: 7.7%
The last fund on this list is a very tactical option that is red hot right now, but it has risks if and when inflationary pressures cool off. Specifically, this Fidelity fund invests in Treasury inflation-protected securities, or TIPS. This special class of bonds is benchmarked to the widely followed consumer price index, or CPI, that’s tied to a basket of household expenditures, including transportation, food and housing. So when the CPI rises, the principal value of TIPS rise as well — and you get paid interest based on the adjusted principal, which has resulted in tremendous payouts lately thanks to the red-hot rate of inflation since the pandemic has abated. On the downside, as inflation seems to be cooling off, there could be the risk of a commensurate rollback in TIPS in the future. But if you’re expecting prices to stay high or even move higher, FIPDX could be worth a look.
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7 Best High-Dividend Mutual Funds originally appeared on usnews.com
Update 11/09/23: This story was previously published at an earlier date and has been updated with new information.
