Some dividend-loving funds hit new highs

The top mutual fund since the market's May 21 top: Invesco Dividend Income A, up 5.2%

Mar 8, 2016 @ 1:12 pm

By John Waggoner

The average stock fund investor is still sitting on losses since the market's May 2015 peak. But many funds that invest like your grandparents have already climbed out of the hole.

The average diversified U.S. stock fund has tumbled 9.2% since the Standard and Poor's 500 hit its most recent high on May 21, 2015, according to Morningstar. The index itself is down 4.2%, including reinvested dividends.

Nevertheless, a few funds are showing gains since the market's unpleasantness last summer. The common denominator: A love of dividends.

The top mutual fund since the market top: Invesco Dividend Income A (IAUTX), up 5.2%. The fund's top three holdings are dividend stalwarts Verizon Communications Inc. (VZ), The Coca-Cola Co. (KO) and General Mills Inc. (GIS).

Next up: Copley (COPLX), up 4.9%. The fund, run by founder Irving Levine since 1978, simply aims to accumulate and distribute dividend income. Its top holding is NextEra Energy Inc. (NEE), an electric utility that has gained 9.43% this year.

Federated Strategic Value Dividend (SVAAX) is third in line, sporting a 4.1% gain since the 2015 market peak. The fund has a fondness for smokers: Its top two holdings are Altria Group Inc. (MO) and Philip Morris International Inc. (PM).

Top-performing exchange-traded funds since the market top followed the same pattern. PowerShares S&P 500 High Dividend Low Volatility (SPHD) has jumped 12.2% since May 2015. Runner-up: ProShares Russell 2000 Dividend Growers (SMDV), up 7.8%.

Not all the top funds since the May market top are dividend players. Aberdeen U.S. Small Cap Equity Fund Class A (GSXAX) has gained 3.8%, thanks to this year's small-cap stock rally. And Summit Global Investments U.S. Low Volatility Equity Fund (SILVX), up 3.7%, looks for stocks with good performance but few manic mood swings .

The drawback with all these funds: They don't look quite as good during rip-snorting bull markets as more aggressive funds. Over the long term, however, some of these funds do exceptionally well. Invesco Dividend Income A, for example, has beaten 98% of its peers the past 10 years. Federated Strategic Value Dividend has beaten 80% of its peers. Only Copley has been a long-term laggard, beating only 40% of its brethren over the past decade.

For advisers, the lessons from the top-performing funds in a miserable market are fairly clear: Defensive funds are great when the market is down, but the glow often fades over the course of a bull market. In the long run, however, dividends really do matter.

Correction: This story was updated to fix the name of the Federated Strategic Value Dividend fund


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