Dividend Fund Choices for Long-Term Investors
Companies / Dividends Aug 26, 2016 - 05:55 PM GMTBy: Submissions
Market Bulls writes: With global interest rates holding at historically low levels, many long-term investors are looking for new ways of generating income returns. One of the most attractive choices in the space is the Vanguard High Dividend Yield Index Fund (VHDYX), which is an open-end fund. The central aim of the fund is to track the share price and dividend performance seen in the FTSE High Dividend Yield Index, which is comprised of common stocks that offer higher dividends when compared to the sector averages.
The Vanguard High Dividend Yield Index Fund investa heavily in many of the blue-chip stocks that are well-know to dividend investors. Eight of its top 10 holdings have generated strong dividend growth and double-digit growth in stock appreciation over the last year. Its top holding include: Microsoft (MSFT), Exxon Mobil (XOM), Procter & Gamble, AT&T, Wells Fargo and others.
On the back of its stake in blue-chips, Vanguard High Dividend Yield Index Fund has generated returns of 15.44% annually, compared with 15.22% for Vanguard's S&P 500 index fund. The fund has the potential to generate better returns for investors, considering its investments in quality high-dividend stocks.
Alternative Dividend Fund Choices
Alternatively, the T. Rowe Price Dividend Growth Fund (PRDGX) continues to outperform the Standard & Poor’s 500 index -- something the fund has done consistently over the last 15 years. There are numerous ways to deal with dividend investing and this is one reason why long-term investors tend to consider structured offerings like betterment or wealthfront.
Tom Huber, the manager of the $5.9 billion PRDGX fund, is working on an updated strategy for investing in high-dividend growth stocks rather than high-dividend yield stocks. This strategy has generated stable returns investors and fund managers over the last 10 years.
According to the fund manager the aim of PRDGX is to balance a competitive current yield with high dividend growth. Benefits can be seen when fund are successfully able to avoid building a a concentration in a small number of high-yielding sectors, but the fund does show a clear focus on telecoms and utilities.
Since the beginning of this year, the fund has returned 10.21% to investors and this can be compared to returns of 8.4% in the S&P 500. The fund’s major holdings include: Comcast (CMCSA), General Electric (GE), Pfizer (PFE), Becton Dickinson (BDX) and others.
T. Rowe Price Dividend Growth Fund also focuses on the financial sector, which accounts for 17.6% of its total holdings. The fund adds stocks from the energy, utility and materials sectors to create a diversified balance. Overall, the fund’s strategy of investing in high-dividend growth stocks seems to be working and PRDGX should continue to be considered in long-term strategies going forward.
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