Top 5 Equity Income Mutual Funds (April 2011)

Among the most conservative kinds of mutual funds, equity income funds are ideal for investors seeking a steady income stream. These funds actively look for companies with a history of paying out regular dividends, in both good times and bad. Stocks of blue chips companies and utilities as well as preferred stocks constitute a substantial part of their portfolios. Another advantage of such funds is that they also purchase convertible securities. These instruments are senior to stocks when it comes to a firm’s income flow, making these funds an even more secure option for the cautious investor.

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.

California Investment Equity Income (EQTIX) invests a large proportion of its assets in income generating domestic equity securities. The fund focuses on acquiring stocks but also holds short term debt securities and money market instruments. The equity income mutual fund has a three year annualized return of 5.22%.

Stephen C. Rogers is the fund manager and he has managed this equity income mutual fund since 2003.

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 13.23% 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 is expected to rise appreciably. The equity income mutual fund has a five year annualized return of 4.39%.

As of December 2010, this equity income mutual fund held 67 issues, with 5.01% of its total assets invested in ExxonMobil Corporation.

Fidelity Equity-Income II (FEQTX) seeks reasonable income with capital growth as a secondary objective. The fund invests the majority of its assets in income equity securities which generate income. It invests in both domestic and foreign securities. The equity income fund returned 21.24% in the last one year period.

Stephen R. Petersen is the fund manager and he has managed this equity income mutual fund since 2009.

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. The equity income mutual fund has a ten year annualized return of 5.64%.

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%.

To view the Zacks Rank and past performance of all equity income mutual funds, then click here.

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