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US stock markets continued to bleed into the holiday season as retail sales slowed and the Federal Reserve raised interest rates. The Dow, S&P 500, and Nasdaq have posted negative returns of 8.63%, 18.26%, and 30.90%, respectively, this year.
Inflation, the biggest threat to the economy in 2022, remains at 7.1 percent. Cooling compared to a high of 8.2% in September and 8.3% in August. However, it remained well above the Fed’s 2% target, indicating further monetary tightening measures in the near term.
At another meeting on December 14, 2022, Fed Chairman Jerome Powell raised overnight interest rates by 0.5 basis points, raising concerns that the Fed’s continued rate hikes could push the economy into recession. With interest rates close to zero percent in one year, the current rate is 4.25% to 4.5%, the highest in 15 years.
Meanwhile, retail sales fell 0.6% in November, the Commerce Department reported, showing that inflation took a heavy toll on consumer spending. This is not good for the economy in terms of the stock market.
Globally, China’s rampant covid-containment policies have taken a toll on its growth. Retail sales fell 5.9% from a year earlier, while industrial production, which grew 2.2%, failed to meet road safety. Exports in November fell by 8.7% from a year ago due to declining global demand. High energy costs due to the ongoing war in Ukraine have exacerbated one of the worst energy crises in recent decades and disrupted global supply chains.
As these events are unlikely to resolve soon, investors looking to diversify their portfolios and earn regular income can opt for dividend paying mutual funds.
Mutual funds generally reduce transaction costs and diversify portfolios without the large commission fees associated with buying stocks (read more: Mutual Funds: Pros, Cons and Where to Make Money for Investors).
So we’ve selected three mutual funds with promising dividend yields, delivering impressive 3-year and 5-year annualized returns, boasting a Zacks Mutual Fund Rank #2 (Buy), and offering a minimum initial investment of $5,000. Lower expense ratio compared to category average.
Blackrock High Equity Income Fund BMEAX seeks high current income with capital appreciation by investing most of its assets with debt, if any, in equity securities, preferably in large caps. BMEAX Advisors invests in equity-linked instruments that provide exposure to equity securities and covered call options or other financial instruments.
Tony DeSpirito has been the lead manager of BMEAX since June 12, 2017, and the majority of the fund’s holdings were in financials (15.46%), technology (12.90%), and health (7.4%) as of November 30, 2022.
BMEAX’s dividend yield is 6.12%. The fund’s 3-year and 5-year annualized returns are 8.4% and 7.1%. The annual expense ratio of 1.10% compares to the category average of 1.11%. BMEAX has a Zacks Mutual Fund Rank #2.
To see how this fund has performed against its category and other 1 and 2 listed mutual funds, please click here.
UBS Variable Alpha Fund BNAAX seeks capital appreciation with current income by investing the majority of its net assets in global equity, global fixed income and cash equivalent markets. BNAAX Advisors can invest in high potential domestic and foreign issues.
Alan Zlatar has been the lead manager of BNAAX since April 20, 2018, and the majority of the fund’s holdings are in others (93.12%) and finance (6.88%) as of November 30, 2022.
BNAAX’s dividend yield is 8.3 percent. The fund’s 3-year and 5-year annualized returns are 1.9% and 0.9%. The annual expense ratio of 1.35% is lower than the category average of 1.52%. BNAAX has a Zacks Mutual Fund Rank #2.
Turtle Energy Infrastructure and Income Fund INFRX invests the majority of its assets in equity and debt securities of companies focused on the energy infrastructure sector and, through its primary limited partnership, in equity and debt securities focused on the energy infrastructure sector. INFRX may elect to invest a small portion of its assets in restricted securities.
Brian A. Kessens has been INFRX’s lead manager since October 30, 2020, and the majority of the fund’s holdings are in Other (35.14%), Utilities (31.14%) and Energy (18.02%) as of November 30, 2022.
INFRX’s dividend yield is 5.5%. The fund’s 3-year and 5-year annualized returns are 12.4% and 6.3%. The annualized expense ratio of 1.38% is roughly in line with the category average of 1.56%. INFRX has a Zacks Mutual Fund Rank #2.
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