First, we select the top trending category from more than 200 categories listed on MutualFunds.com based on the percentage increase in monthly viewership. From the top trending category, we select the top three funds with the highest one-year trailing total returns. To ensure the quality and staying power of funds, we only look at mutual funds with a minimum of $250 million in assets and a track record of at least one year. We also remove mutual funds that are closed to new investors and not available for investment outside registered accounts, such as retirement or 529 accounts.
In this week’s edition, we analyze the top three High-Yield Dividend Income Funds. These funds pay above average dividend yield through holdings across various markets and asset classes.
The low interest rate environment has led many investors to seek out alternative ways to generate income in their portfolios. High-yield dividend income funds aim to generate attractive dividends without relying on conventional dividend stocks or bond markets. For example, the funds that we cover below span across small-cap equities, precious metals and emerging markets. These funds are aimed to provide an added level of diversification away from the usual U.S. markets.
Our breakdown of each fund includes key aspects, such as one-year performance, fund expenses, investment style and management teams, to give you an overview of how these funds hold up against their peers.
Be sure to check out the High-Yield Dividend Income Funds page to find out more about other funds in this category as well.
1. PIMCO StocksPLUS Small-Cap Fund (PCKAX)
The top fund in our list this week is the PIMCO StocksPLUS Small-Cap Fund (PCKAX). It has a 74% trailing one-year total return with a 1.15% expense ratio and a 4.98% yield.
The actively managed fund’s strategy is to invest in a small-cap equity blend that exceeds the total return of the Russell 2000 index. In order to do this, the fund uses Russell 2000 index derivatives that are backed by a diversified portfolio of fixed income instruments.
The fund is managed by Managing Director of PIMCO and Generalist Portfolio Manager Mohsen Fahmi, along with Jing Yang, Bryan Tsu and Marc Seidner. Mohsen Fahmi has the longest tenure at six and half years while the team has an average tenure of three years.
The fund’s portfolio holds more than 640 securities that primarily consist of Russell 2000 index futures’ contracts. While the fund holds fixed income securities in order to back the derivatives, the net economic exposure includes about 70% fixed income and 27% equities.
Learn more about different portfolio management concepts here.
2. Franklin Gold and Precious Metals Fund (FKRCX)
The number two fund on our list this week is the Franklin Gold and Precious Metals Fund (FKRCX). The fund delivered a solid 51% trailing one-year total return with a 0.93% expense ratio at 12.05% yield.
The fund’s strategy is to invest at least 80% of its net assets in companies around the world that mine, process or deal in gold or other precious metals, such as silver, platinum and palladium. Since these investments are in production companies rather than commodities, the fund offers a compelling dividend yield with exposure to precious metals.
The fund is managed by Portfolio Manager of Franklin Advisors Steve Land, CFA, who has been with the fund for nearly 22 years. Mr. Land is joined by Portfolio Manager Frederick Fromm, who has been with the firm for over 15 years.
The fund’s portfolio consists of over 100 equities concentrated in basic materials with 92% of those companies operating outside of the United States. The three largest holdings include Barrick Gold Corp. at 5.50%, Newmont Corp. at 4.06% and Newcrest Mining Ltd. at 3.91% with the top ten holdings making up about 35% of the total portfolio.
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3. PIMCO RAE Plus EMG Fund (PEFFX)
The third place on the list belongs to the PIMCO RAE Plus EMG Fund (PEFFX). The fund generated a robust 48% trailing one-year total return with a 1.76% expense ratio and a 7.54% yield.
The fund’s strategy is to exceed the total return of the MSCI Emerging Markets Value Index under normal circumstances by purchasing equities that are economically tied to emerging market countries as well as bonds using its absolute return strategy.
The fund is managed by Founder and Chairman of Research Affiliates Robert Arnott, a Sub-advisor , Managing Director of PIMCO and Generalist Portfolio Manager, Mohsen Fahmi, as well as Christopher Brightman, Jing Yang, Brian Tsu and Marc Seidner. The eldest managers have a six-year tenure while the average tenure is about three and a half years.
The fund’s portfolio consists of over 100 securities that include 49.6% government bonds, 36.76% cash and equivalents, 7.27% securitized holdings, 4.1% derivatives, and other corporate and municipal fixed income securities. The fund’s geographic exposure includes 39% China, 13% South Korea, 13% Taiwan, 9% India and 5% Brazil-based assets.
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The Bottom Line
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Note: Trailing one-year total returns as of March 10, 2021.