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The Consumer Price Index (CPI), reported by the US Bureau of Labor Statistics on September 13, rose 8.2 percent year-over-year, mainly due to higher costs of shelter, food and medical care. Inflation dropped slightly from 8.3 percent in August. The cost of living rose 0.4 percent in September, beating forecasts for a 0.3 percent increase, according to a poll of economists polled by the Wall Street Journal. An American is suffering because of high prices on many categories of consumers.
Earlier this year, investor sentiment remained pessimistic. The new inflation numbers confirm that the Fed will continue its monetary policy of consistently raising interest rates, with no less than 75 basis-points at the next meeting to drain liquidity from the market.
Although the Fed’s expectation of achieving 2 percent inflation seems far-fetched, rising borrowing costs are expected to weaken the economy and negatively impact consumer spending, employment and other macroeconomic factors. All this could push the economy into recession.
Major indexes such as the S&P 500, Dow and Nasdaq composite have posted negative returns of 23.0%, 17.34% and 31.93%, respectively, so far this year. Meanwhile, rising geopolitical tensions over China’s military escalation and Russia’s renewed threat to Ukraine are contributing to growing investor concerns. 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 their portfolios without paying many of the commission fees typically associated with buying stocks (Read more: Mutual Funds: Pros, Cons and How Investors Make Money).
We have thus selected five mutual funds with promising dividend yields, impressive 3-year and 5-year annualized returns, boasting a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Keep an initial investment of $5,000 and a low expense ratio.
Arrow Managed Futures Strategy Fund MFTFX seeks to achieve its investment objective by investing the majority of its net assets using a fixed income strategy, directly or indirectly, in other funds such as U.S. government securities, short-term, high-quality, fixed-income securities, money-market instruments, overnight and fixed-term repurchase agreements, cash and other cash. Cash peers, aged one year or less. MFTFX also invests a small portion of its net assets using futures strategies managed in a wholly owned and controlled subsidiary.
Joseph Barrato has been the CEO of MFTFX since July 31, 2014, and the majority of the fund’s holdings are in others (70.75%) and finance (29.25%).
MFTFX’s dividend yield is 22.0%. The fund’s 3-year and 5-year annualized returns are 15.2% and 12.9%. The annual expense ratio of 1.54% is lower than the category average of 1.68%. MFTFX has a Zacks Mutual Fund Rank #1.
To see how this fund has performed against its category and other 1 and 2 listed mutual funds, please click here.
Hartford Real Estate Fund HRLTX seeks to achieve long-term returns above inflation over the macroeconomic cycle. HRLTX Advisors generally invests at least half of its net worth in equity securities and the remainder in fixed income and commodity-related investments.
Brian M. Garvey has been the lead manager of HRLTX since May 28, 2010, and the majority of the fund’s holdings are in energy (15.60%) and industrial cyclicals (12.20%).
HRLTX’s dividend yield is 14.6 percent. The fund’s 3-year and 5-year annualized returns are 5.2% and 2.9%. The annual expense ratio of 0.95% is lower than the category average of 1.0%. HRLTX has a Zacks Mutual Fund Rank #1.
Franklin Gold and Precious Metals Fund FKRCX invests the majority of its net assets in securities of domestic and foreign gold and precious metals operating companies, regardless of market capitalization. FKRCX advises primarily on small and mid-market capitalization of non-US companies.
Steve M. Land has been FKRCX’s lead manager since April 1, 1999, and the majority of the fund’s holdings are in industrial cyclicals (54.89%) and retail (20.97%).
FKRCX’s dividend yield is 13.8%. The fund’s 3-year and 5-year annualized returns are 0.8% and 2.1%. The annual expense ratio of 0.89% is lower than the category average of 1.17%. FKRCX has a Zacks Mutual Fund Rank #1.
PGIM Real Estate Fund PUDZX invests in assets that can perform well in high inflation conditions and generate positive returns after adjusting for inflation numbers. PUDZX invests in real assets such as commodities, domestic and international real estate and infrastructure, natural resources, utilities, fixed income instruments and gold.
Edward L. Campbell has been the lead manager of PUDZX since December 30, 2010, and the majority of the fund’s holdings are in real estate (19.36%) and energy (15.74%).
PUDZX’s dividend yield is 13.3 percent. The fund’s 3-year and 5-year annualized returns are 5.5% and 4.5%. The annual expense ratio of 0.16% is lower than the category average of 0.84%. PUDZX has a Zacks Mutual Fund Rank #1.
Ab all market real return portfolio AMTZX invests the majority of its net assets in inflation-indexed fixed income securities, commodities, commodity-linked equity securities, real estate equity securities, inflation-sensitive equity securities and currencies issued by governments outside the United States. AMTZX invests its funds in the above-mentioned instruments which the fund manager believes will directly or indirectly react to changes in rates and inflation.
Daniel J. Lowy has been the lead manager of AMTZX since March 31, 2015, and the majority of the fund’s holdings are in financials (28.71%) and energy (11.44%).
AMTZX’s dividend yield is 11.0%. The fund’s 3-year and 5-year annualized returns are 6.2% and 4.0%. The annual expense ratio of 0.83% is lower than the category average of 0.95%. AMTZX has a Zacks Mutual Fund Rank #2.
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