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3 Mutual Funds for Regular Dividend Income in September

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Volatility in Wall Street has increased due to a rise in macroeconomic uncertainties. Elevated oil prices and a tight labor market are fueling the current inflation level. All eyes are on Federal Reveres’ policy meet outcome to be released later today (Sep 20, 2023). Investors expect the central bank to keep overnight interest rates unchanged, but Fed Chairman Jeromy Powell has repeated the intention to bring down inflation levels to 2% over the long run, leaving room for further rate hikes.

CPI for the month of August came in at 3.7% year on year compared to 3.2% in July after a gradual descent till June, when it was at 3%. The central bank, in its aggressive fight against inflation, has already raised the interest rates to the 5.25-5.5% range, the highest in more than 22 years. Further rate hikes would cripple the economy if the Fed fails to create the right balance between higher interest rates and economic growth. 

Retail sales for the month of August rose 0.6% from 0.5% increase in July mostly due to a big rise in gas prices. Oil prices are hovering at the highest level in 10 months due to an increase in oil demand amid tighter supply. Analysts are expecting crude prices to reach $100/barrel after the decision of OPEC+ members to cut oil supply by 1.3 million barrels per day till the end of 2023. Rising crude prices will have a bigger impact on countries struggling with inflation.

The labor market is still tight while softening. Data released by the Bureau of Labor Statistics on Sep 1, 187,000 jobs were added for the month of August, while unemployment unexpectedly rose to 3.8%, the highest since February 2022. The Fed expects further rebalancing in the labor market.

Amid such uncertainties, investors looking to diversify their portfolios and earn a regular income may choose to invest in the below-mentioned dividend-paying mutual funds. These funds invest in companies that pay out regular dividends. Due to their well-established businesses and proven business models, these companies tend to remain profitable even in adverse economic situations, which benefits the performance of the fund.

Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

We have, thus, selected three mutual funds that have a promising dividend yield, have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy), offer a minimum initial investment within $5,000, and carry a low expense ratio as compared to its category average.

Shelton Equity Income Fund (EQTIX - Free Report) invests most of its assets, along with borrowings, if any, in domestic equity securities of companies that pay out a relatively high level of dividend income within the industry. EQTIX advisors generally invest in common stocks of large and medium capitalization U.S. companies.

Stephen C. Rogers has been the lead manager of EQTIX since Dec 30, 2003, and most of the fund’s holdings were in companies like Apple (3.0%), UnitedHealth Group (2.4%) and Broadcom (2.3%) as of May 31, 2023.

EQTIX’s dividend yield is 7.6%. The fund’s 3-year and 5-year annualized returns are 10.6% and 7.5%, respectively. The annual expense ratio of 0.71% is almost in line with the category average of 1.11%.

To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Invesco SteelPath MLP Income Fund (MLPZX - Free Report) seeks total return by investing most of its assets, along with borrowings, if any, in master limited partnerships with companies that are engaged in transportation, storage, processing, refining, marketing, exploration, production, and mining of minerals and natural resources. MLPZX also invests in derivatives and other instruments that have similar economic characteristics.

Stuart Cartner has been the lead manager of MLPZX since Mar 30, 2010, and most of the fund’s holdings are in Energy Transfer (14.2%), MPLX LP (13.7%) and NuStar Energy (8.5%) as of May 31, 2023.

MLPZX’s dividend yield is 7.0%. The fund’s 3-year and 5-year annualized returns are 33.7% and 7.8%, respectively. The annual expense ratio of 1.13% is lower than the category average of 1.56%.

Bridges Investment Fund (BRGIX - Free Report) invests most of its assets in a diversified portfolio of common stocks of domestic companies that its fund advisors believe to have the potential for increased earnings and dividends over time. BRGIX advisors also invest in U.S. dollar-denominated securities of foreign issuers and American Depositary Receipts traded on U.S. exchanges or over-the-counter markets.

Edson L. Bridges has been the lead manager of BRGIX since Apr 10, 1997, and most of the fund’s holdings are in companies like Apple (11.0%), Microsoft (8.3%) and Mastercard (5.9%) as of Mar 31, 2023.

BRGIX’s dividend yield is 5.0%. The fund’s 3-year and 5-year annualized returns are 9.9% and 12.2%, respectively. The annual expense ratio of 0.77% is almost in line with the category average of 0.99%.

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