With the grueling stock market fall, investors are certainly looking for defensive investments. The good news is that there are many high-quality companies — such as AT&T (NYSE:T), Pfizer (NYSE:PFE) and Coca-Cola (NYSE:KO) — that are paying juicy dividends. In many cases, the yields are higher than 30-year Treasury bonds.
And yes, one effective way to invest in dividend-paying stocks is to buy a mutual. So here’s a look at some top offerings:
Hartford Dividend & Growth A Fund
The Hartford Dividend & Growth A Fund (MUTF:IHGIX), which has $6.2 billion in assets, is primarily focused on mega-companies. Top holdings include AT&T, Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), IBM (NYSE:IBM) and Wells Fargo (NYSE:WFC). What’s more, the overall yield is 1.29%.
Because of the focus on quality and stability, the fund’s portfolio manager, Edward Bousa, has been able to deal quite effectively with market volatility.
Franklin Rising Dividends A Fund
Founded in 1947, Franklin Resources (NYSE:BEN) has built a powerhouse in mutual funds. Then again, it has been able to post solid long-term returns for its investors.
One of the standouts is the Franklin Rising Dividends A Fund (MUTF:FRDPX), which got its start in 1987. In fact, the fund’s portfolio manager, William Lippman, still is at the helm.
Basically, the strategy is to focus on companies that have consistently increased their dividends. And yes, there must be a compelling case that the strength will continue for the long haul. In other words, the portfolio has many companies that generate large amounts of cash flows and have low debt levels.
Invesco Diversified Dividend Y Fund
Meggan Walsh, who manages the Invesco Diversified Dividend Y Fund (MUTF:LCEYX), looks for investments that have growth ramps yet are selling at discounted valuations. Actually, in light of the recent market plunge, these opportunities are certainly easier to find.
Keep in mind that dividends are not the only requirement. For example, Walsh looks for companies that also have aggressive share buyback programs. Some of the top holdings include SunTrust Banks (NYSE:STI), Kimberly-Clark (NYSE:KMB) and Johnson Controls (NYSE:JCI).
The fund also has a healthy dividend payout, coming to about 2.13%.
Vanguard Dividend Growth Fund
The Vanguard Dividend Growth Fund (MUTF:VDIGX) invests primarily in large companies that have strong track records of paying dividends. This certainly helps to provide downside protection.
As should be expected, the expense ratio is at a low 0.34%, which helps to boost returns. Consider that the overall dividend yield is 1.99%.
The fund also avoids aggressive trading. That is, the turnover is only 17% per year.
Tom Taulli is the author of various books, including “All About Commodities” and “All About Short Selling.” You can find him at Twitter account @ttaulli. He does not own a position in any of the stocks named here.
