Dividend-paying mutual funds allow the investor to earn at least one dividend payment per year, with some offering quarterly or monthly payments. The top-paying high dividend mutual funds as of press time include the Northern Multi-Manager High Yield Opportunity Fund and Putnam Diversified Income Y. We have information about how dividends work, plus details of the top five high-dividend mutual funds below.
What Are Dividends?
Dividends are a way to generate passive income through your investments. They are generated from mutual fund holdings. Stocks and bonds are the mutual fund’s assets, which generate the dividend income.
How often a mutual fund releases dividends varies based on each fund’s policies. However, any mutual fund should pay out dividends at least once a year to avoid tax liability on that income. So, when investing in dividend-paying mutual funds, you are generally guaranteed to get a dividend payment at least once per year.
High-dividend mutual funds act as both a long-term and short-term investment; the long-term aspect is that your shares can increase in price over time, while the short-term aspect is the dividends you’ll earn as an investor.
The Five Highest-Paying Mutual Funds
The following are the five highest-paying dividend mutual funds as of press time (December 2018), based on data we compiled from Morningstar. Keep in mind that, as with any investment product, these numbers fluctuate frequently. You’ll want to visit the fund’s webpage or check Morningstar for the most up-to-date information; we’ve included links for each fund.
Northern Multi-Manager High Yield Opportunity Fund (NMHYX)
NMHYX has a Trailing Twelve Months (TTM) yield of 6.46% — the highest we found in our research. Its assets total over $360 million. The expense ratio is 0.87%. Find up-to-date numbers and more facts about this fund at Northern Trust or Morningstar’s NMHYX page.
American Funds American High-Income Trust (HIGFX)
The TTM yield for the American Funds American High-Income Trust was 6.38% as of December 2018, with an expense ratio of 0.35% — the lowest expense ratio on this list. It has assets of nearly $16 billion, with the majority of its holdings in corporate bonds. See up-to-date numbers and more at American Funds or Morningstar’s HIGFX page.
Fidelity High Income (SPHIX)
The Fidelity High Income Fund has total assets of over $4 billion. Its top sector is corporate bonds. This fund had an expense ratio of 0.70% and a TTM yield of 5.78% as of December 2018. Learn more and find up-to-date numbers at Fidelity or Morningstar’s SPHIX page.
Putnam Diversified Income Y (PDVYX)
The Putnam Diversified Income fund has a TTM yield of 5.62% and an expense ratio of 0.75% as of press time. Its assets total over $4 billion, and its top holdings are in the mortgage field. For more information and up-to-date numbers, visit Putnam Investments or Morningstar’s PDVYX page.
BlackRock High Yield Bond Fund (BHYSX)
The BlackRock High Yield Bond Fund is largely invested in corporate bonds, with total assets of over $14 billion. This fund’s expense ratio is 0.94%. The TTM yield at press time was 5.61%. Learn more and see up-to-date numbers at BlackRock or Morningstar’s BHYSX page.
To give you a few more options, the following funds had TTMs of over 2.5% as of December 2018:
- Vanguard Real Estate Index Admiral (VGSLX): 4.23%
- Vanguard Real Estate Index Investor (VGSIX): 4.10%
- Columbia Dividend Opportunity Fund (CDOYX): 3.53%
- American Funds International Growth and Income (RIGGX): 3.21%
- Vanguard Utilities Index Fund; Admiral (VUIAX): 3.00%
- Vanguard High Dividend Yield Index (VHDYX): 2.88%
- Fidelity Strategic Dividend & Income (FSDIX): 2.77%
- Schwab International Core Equity (SICNX): 2.69%
You may also be interested in our list of mutual funds with average annual returns of around 12%.
Dividends can supplement your income while still allowing you to save for the future. Some of the highest-paying mutual funds include Fidelity High Income, the BlackRock High Yield Bond Fund, and American Funds’ American High-Income Trust, but there are a lot of options that can earn you over a 2.5% dividend income.