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4 Dividend-Paying Mutual Funds to Generate Positive Returns

The bearish sentiment seems to have overpowered the bullish sentiment in the stock market from the beginning of this year since the major indexes — the S&P 500, the Dow & the Nasdaq — have given a negative return of 10.12%, 6.44%, and 17.13%, respectively. This clearly reflects the sentiment of investors who have lost massive wealth year to date. Such a meltdown is the result of various macroeconomic factors and rising geopolitical tensions.

In the United States, the Federal Reserve has adopted an aggressively hawkish monetary policy to tame sky-high inflation. Although the consumer price index (CPI) for the month of July grew 8.5% year over year, marking a slower annual increase compared to the month of June, because of lower gasoline prices, it is still a four-decade high and is pinching hard the pockets of an average American. The Fed, by the way, is expected to continue with its rate hike stance to bring inflation to its desired level of around 2%.

The Russia-Ukraine war, along with rising military tension between China and Taiwan, could easily escalate into a war-like situation anytime, which is no doubt contributing to the growing fear among investors. Thus, investors looking to diversify their portfolios and earn a regular income in such uncertain times can choose to invest in dividend-paying mutual funds.

Mutual funds, in general, reduce transaction costs and diversify their 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 four 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) or 2 (Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.

Columbia Commodity Strategy Fund CCFYX invests in a portfolio of commodity-linked derivative instruments such as futures, structured notes, and swaps that provides exposure to the underlying assets that are traded in the commodities markets, without investing directly in physical commodities.

Matthew Ferrelli has been the lead manager of CCFYX since Dec 9, 2019, and most of the fund’s exposure is in sectors such as others, bonds and convertible.

CCFYX’s dividend yield is 27.7%. The fund’s 3-year and 5-year annualized returns are 19.1% and 9.7%, respectively. The annual expense ratio of 0.70% is lower than the category average of 1.11%. CCFYX has a Zacks Mutual Fund Rank #1.

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

Credit Suisse Commodity Return Strategy Fund CRSAX seeks a positive total return by investing most of its net assets in a portfolio of investment-grade fixed income securities normally having an average duration of one year or less. CRSAX advisors also invest a small portion of its assets in Credit Suisse Cayman Commodity Fund and other commodity-linked-derivative instruments.

Christopher Burton has been the lead manager of CRSAX since Oct 27, 2005, and most of the fund’s exposure is in sectors such as others, bonds and cash.

CRSAX’s dividend yield is 39.2%. The fund’s 3-year and 5-year annualized returns are 17.1% and 8.9%, respectively. The annual expense ratio of 1.05% is lower than the category average of 1.11%. CRSAX has a Zacks Mutual Fund Rank #2.

Hartford Real Asset Fund Class R5 HRLTX seeks a long-term total return higher than the inflation rates over the macroeconomic cycle by investing in a portfolio that comprises equity securities, fixed-income investments, and commodity-related investments in various proportions. HRLTX generally invests in a globally diverse mix of investments

Brian M. Garvey has been the lead manager of HRLTX since May 28, 2010, and most of the fund’s exposure is in others, energy and finance.

HRLTX’s dividend yield is 13.4%. The fund’s 3-year and 5-year annualized returns are 7.7% and 5.4%, respectively. The annual expense ratio of 0.95% is lower than the category average of 1.0%. HRLTX has a Zacks Mutual Fund Rank #1.

Invesco Balanced-Risk Allocation Fund ABRYX seeks to preserve capital in the downmarket by investing in a portfolio of multiple asset classes. ABRYX generally invests in derivative instruments like futures, options, currency forward contracts and swap agreements.

Mark Ahnrud has been the lead manager of ABRYX since Jun 2, 2009, and most of the fund’s exposure is in sectors such as bonds, stocks and others.

ABRYX’s dividend yield is 13.4%. The fund’s 3-year and 5-year annualized returns are 5.1% and 5.0%, respectively. The annual expense ratio of 1.04% is lower than the category average of 1.29%. ABRYX has a Zacks Mutual Fund Rank #2.

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