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4 Dividend Mutual Funds for 2019

Recently, the International Monetary Fund (IMF) slashed its global economic forecast for 2019 as well as the next year. The body opined that slowdown in Europe and certain emerging markets will likely result in a global economic slowdown. Further, China’s economic woes and “No Deal” Brexit were the two other factors that resulted in lackluster projections by the IMF.

Companies that pay consistent dividends are unperturbed to economic uncertainty. These companies have steady cash flows and are mostly financially stable companies. This helps stock prices to increase gradually over a period of time.

Moreover, dividends are less taxed compared to interest income, which helps a portfolio grow at a compounded rate and offers protection against earnings manipulation. Adding dividend mutual funds to one’s portfolio thus seems prudent.

IMF Presents Bleak Global Forecasts for 2019 and 2020

The IMF has revised its global forecast for 2019 and 2020 to 3.5% and 3.6%, respectively, 0.2% and 0.1% lower than the projections released in October. The IMF had last made such a reduction in October, citing the ongoing U.S.-China trade war as a major issue.

The latest cuts are also significant as these were announced ahead of the annual World Economic Forum, which began on Monday at Davos, Switzerland.

China’s Economic Growth Slowest in 28 Years

The latest growth data released by the Chinese government further dampened investors’ sentiments. Per the data, China’s economy expanded 6.6% last year. This is the most sluggish pace of growth that China has witnessed since 1990. The slump, however, was in line with most analysts’ expectations, given China’s participation in the trade war against the United States.

Government Shutdown Crosses a Month

The partial U.S. government shutdown stretched for the 33rd day on Jan 24. Discussions between the Trump administration and congressional Democrats have been inconclusive so far despite Trump’s colleagues urging him to strike a deal.

Democrats have continuously overruled Trump’s demand for $5.7 billion for U.S.- Mexico border wall. This led one-quarter of the U.S. government to shut down last month. However, the Senate is due to hold competing votes on Thursday to discuss Trump’s proposal to spend the amount on the border wall as well as a Democratic bill that will fund the government through Feb 8 albeit without a wall.

4 Best Fund Choices

We have selected four dividend paying mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5,000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Vanguard Dividend Appreciation Index Inv VDAIX seeks capital growth by investing in companies that have registered high dividend yields over time. The fund follows an indexing investment approach by following the performance of Nasdaq US Dividend Achievers Select Index. The fund carries a Zacks Mutual Fund Rank #1.

This Zacks sector – Large Cap Blend product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

VDAIX has an annual expense ratio of 0.15%, which is below the category average of 0.95%. The fund generated three and five-year returns of 10.1% and 7.6%, respectively. VDAIX has a year-to-date dividend yield of 1.88%.

Fidelity Strategic Dividend & Income FSDIX seeks reasonable income. It invests a large portion of its assets in equity securities. FSDIX invests half of its assets in common stocks, 15% in REITs, 15% in convertible securities and the rest in preferred stocks. It invests in both domestic and foreign issuers. The fund carries a Zacks Mutual Fund Rank #2.

This Zacks sector – Large Cap Blend product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSDIX has an annual expense ratio of 0.73%, which is below the category average of 0.78%. The fund has a three and five-year return of 6.5% and 6.2%, respectively. FSDIX has a year-to-date dividend yield of 3.02%.

Vanguard High Dividend Yield Index Inv VHDYX seeks capital appreciation by investing in companies that generate high dividend yields. The fund does so by tracking the performance of a benchmark index that follows the returns of such companies. VHDYX follows an indexing investment approach by following the performance of FTSE High Dividend Yield Index. The fund carries a Zacks Mutual Fund Rank #2.

This Zacks sector – Large Cap Value product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

VHDYX has an annual expense ratio of 0.14%, which is below the category average of 1.00%. The fund has a three and five-year return of 8.5% and 7.7%, respectively. VHDYX has a year-to-date dividend yield of 3.11%.

T. Rowe Price Dividend Growth PRDGX invests at least 65% of its total assets in dividend-paying common stocks that have favorable prospects for increasing dividends and long-term appreciation.

This Zacks sector – Large Cap Blend product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

PRDGXhas an annual expense ratio of 0.64%, which is below the category average of 0.95%. The fund has a three and five-year return of 9.6% and 8.7%, respectively. PRDGX has a year-to-date dividend yield of 1.69%.

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