Apart from debt instruments, investors would do well to consider equity income funds when they prefer regular income over capital growth. Portfolios holding debt as well as equity income funds are also better diversified. This is because the value of the underlying equity securities is dependent on the particular industry which they represent. A steady income stream via regular dividends also helps to soften the impact of falling stock prices. Equity income funds offer investors a convenient option of building well diversified portfolios which provide regular income.
Below we will share with you 5 top rated equity income mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future.
Eaton Vance Dividend Income A (EDIAX) seeks current income and capital growth. The majority of its assets is invested in common and preferred stocks paying dividends. On occasion it may invest up to 25% of its assets in the utilities sector. The equity income mutual fund returned 12.77% in the last one year period.
The equity income mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.31% compared to a category average of 1.27%.
American Century Equity Income (TWEIX) invests primarily in equity securities with proven track records of paying out regular dividends. The fund seeks out securities which are undervalued and whose price rise appreciably. The equity income mutual fund has a five year annualized return of 4.08%.
As of December 2010, this equity income mutual fund held 67 issues, with 5.01% of its total assets invested in ExxonMobil Corporation.
Neuberger Berman Equity Income A (NBHAX) seeks total return. The majority of its assets are invested in equity securities which generate income. This includes convertible securities, common stocks and master limited partnerships. The equity income mutual fund returned 22.83% in the last one year period.
Alexandra Pomeroy is the fund manager and she has managed this equity income mutual fund since 2006.
American Funds Income Fund of America A (AMECX) invests heavily in dividend paying securities. It uses at least 60% of its assets to purchase equity securities but may also invest in debt. Not more than 25% of its assets may be invested in foreign securities excluded from the S&P 500 Composite Index. The equity income mutual fund has a ten year annualized return of 5.38%.
The equity income mutual fund has a minimum initial investment of $250 and an expense ratio of 0.61% compared to a category average of 1.01%.
Huntington Income-Equity Trust (HIEFX) invests at least 65% of its assets in equity securities which generate significant levels of income. Common and preferred stock as well as other equity securities constitute the bulk of its investments. The equity income mutual fund returned 19.77% in the last one year period.
The Fund Manager is Craig J Hardy and he has managed this equity income mutual fund since 2003.
To view the Zacks Rank and past performance of all equity income mutual funds, then click here.