4 Best Mutual Funds for Dividend Investors
Dividends have accounted for some 40% of overall U.S. market returns, so don't miss out.
The picks below are part of Kiplinger’s Personal Finance’s annual Best List, a roundup of the best values in all the areas we cover — from funds, stocks and ETFs to credit cards and bank accounts to cars, college, kid stuff, phone plans, travel and health. Discover all our Best List picks here.
Kiplinger's Best List, 2016
- Best Mutual Funds You Can Invest in for $125 or Less
- Best Mutual Funds for Rising Interest Rates
- Best Mutual Funds for Investing in Value Stocks
- Best Stocks for Yield at a Reasonable Price
- Best Online Brokers
- Best Rewards Credit Cards
- Best Deals in Online Banking
- Best Personal-Finance Websites, Apps and Software
- Best New Car Values
- Best Shopping Websites and Apps
- Best Ways to Save Time and Money on Travel
- Best Package Tours for Your Money
- Best Travel Discounts for Seniors
- Best Phone Plans for Every Type of User
- Best Websites and Tools to Save on Your Health
T. Rowe Price Dividend Growth (PRDGX, yield 1.3%) owns stocks that have ample capacity to deliver higher dividends. These big and sturdy businesses should also keep chugging along through good times and bad. The mutual fund’s expense ratio of 0.64% isn’t the lowest, but it’s below average in its category. (Prices and yields are as of September 30.)
Schwab U.S. Dividend Equity ETF (SCHD, $42, 3.1%) pays more income than the average U.S. stock fund, but it doesn’t take excessive risks. The fund tracks an index of high-quality companies that have paid dividends for at least 10 consecutive years. An expense ratio of 0.07% a year makes it the cheapest dividend-focused ETF you can buy.
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iShares Core High Dividend ETF (HDV, $81, 3.7%) holds a big chunk of its assets in energy and consumer stocks. The ETF also owns plenty of health care and technology stocks, adding some growth potential to the mix. The fund charges 0.08% per year.
iShares U.S. Preferred Stock ETF (PFF, $39, 5.6%) won’t deliver big gains. But its yield crushes the payouts of most common stocks. About two-thirds of its distributions count as qualified dividends, meaning investors pay top federal income tax rates of just 15% or 20%. For more about holding preferreds, see 4 Good Preferred Stocks Yielding 6% or More.
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