The hope of an economic recovery with which 2023 began soon faded when the consumer price index (CPI) rose 0.5% for January compared with a slower gain of 0.1% in December. The prices of goods and services rose by 6.4% over the past 12 months, with the maximum contribution from the rise in the prices of shelter, food and energy.

In the month of January, more than half a million jobs were added despite high inflation and rising interest rates. The unemployment rate moved down to a level not seen in over five decades. The wages are growing faster than they had a decade ago, which is keeping inflation high.

Retail sales in the said period grew at 3.0%, suggesting that consumer spending is not slowing as anticipated, the labor market continues to be hot, and inflation is not coming down as fast as the Fed had thought.

Since getting control over inflation is the Fed’s primary target, and its ambition for 2% inflation over time looks distant, it is expected the Fed will continue with its interest rate hike stance. Higher interest rates tend to negatively affect earnings and stock prices.

Despite having a solid start to the year, the three major indexes posted negative returns for February. The Dow, S&P 500 and the Nasdaq Composite lost about 4.19%, 2.61% and 1.11%, respectively, last month. The uncertainty may continue to loom in the months ahead.

Investors looking to diversify their portfolios and earn a regular income can choose to invest in the below-mentioned dividend-paying mutual funds.

Mutual funds, in general, reduce transaction costs and diversify 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 five 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 as compared to its category average.

BNY Mellon Global Real Return Fund DRRIX invests most of its net assets in global equities, bonds and cash, and other asset classes like real estate, commodities, currencies and alternative or non-traditional asset classes and strategies through derivative instruments. DRRIX advisors use actively managed multi-asset strategy to produce real returns with less volatility compared to major equity markets over a complete market cycle which is typically a period of five years.

Suzanne Hutchins has been the lead manager of DRRIX since Dec 31, 2010, and most of the fund’s holdings were in companies like Ishares Gold Trust (3.22%), Conocophillips (2.39%) and Astrazeneca (1.43%) as of Oct 31, 2022.

DRRIX’s dividend yield is 8.9%. The fund’s 3-year and 5-year annualized returns are 2.6% and 4.3%, respectively. The annual expense ratio of 0.95% is lower than the category average of 1.29%. DRRIX has a Zacks Mutual Fund Rank #1. 

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

Invesco SteelPath MLP Select 40 Fund MLPEX seeks total return by investing most of its assets, along with borrowings, if any, in master limited partnership investments of issuers that are engaged in the transportation, storage, processing, refining, marketing, exploration, production, and mining of minerals and natural resources. MLPEX advisors also invest in derivatives and other instruments with similar economic characteristics.

Stuart Cartner has been the lead manager of MLPEX since Mar 31, 2010, and most of the fund’s holdings were in companies like Energy Transfer (7.54%), Mplx (7.13%) and Westlake Chemical Partner (5.76%) as of Aug 31, 2022.

MLPEX’s dividend yield is 7.8%. The fund’s 3-year and 5-year annualized returns are 12.4% and 3.6%, respectively. The annual expense ratio of 0.86% is lower than the category average of 1.56%. MLPEX has a Zacks Mutual Fund Rank #2.

Shelton Equity Income Fund EQTIX invests most of its assets, along with borrowings, if any, in domestic equity securities of companies that payout a relatively high level of dividend income within the industry. EQTIX advisors generally invest in common stocks of large and medium capitalization U.S. companies.

Stephen C. Rogers has been the lead manager of EQTIX since Dec 31, 2003, and most of the fund’s holdings were in companies like Amazon.com (2.56%), Microsoft (2.31%) and United Health Group (2.23%) as of Aug 31, 2022.

EQTIX’s dividend yield is 7.6%. The fund’s 3-year and 5-year annualized returns are 8.4% and 5.7%, respectively. The annual expense ratio of 0.74% is almost in line with the category average of 1.11%. EQTIX has a Zacks Mutual Fund Rank #1.

Madison Covered Call & Equity Income Fund MENYX invests most of its assets in common stocks of companies that its fund advisors believe are selling at a reasonable price in relation to their long-term earnings growth rates. MENYX advisors prefer to invest in large-capitalization companies with similar economic features.

Ray DiBernardo has been the lead manager of MENYX since Oct 30, 2009, and most of the fund’s holdings are in companies like T-Mobile US (3.03%), Honeywell International (3.02%) and Baker Hughes (2.86%) as of Oct 31, 2022.

MENYX’s dividend yield is 6.2%. The fund’s 3-year and 5-year annualized returns are 15.6% and 9.6%, respectively. The annual expense ratio of 1.06% is almost in line with the category average of 1.11%. MENYX has a Zacks Mutual Fund Rank #1.

Cullen Enhanced Equity Income Fund Retail ENHRX seeks long-term capital appreciation along with current income by investing most of its assets, along with borrowings, if any, in dividend-paying common stocks of domestic and foreign companies with large and medium market capitalization. ENHRX advisors consider medium-cap companies as those with a market capitalization ranging between $5 billion and $12 billion and large-cap as those with above $12 billion at the time of investment.

Jennifer Chang has been the lead manager of ENHRX since Dec 15, 2015, and most of the fund’s holdings were in companies like Exxon Mobil (4.10%), Bristol Myers Squibb (3.92%) and Merck Corporation (3.63%) as of Sep 30, 2022.

ENHRX’s dividend yield is 5.7%. The fund’s 3-year and 5-year annualized returns are 10.3% and 7.1%, respectively. The annual expense ratio of 0.75% is almost in line with the category average of 1.11%. ENHRX has a Zacks Mutual Fund Rank #1.

More By This Author:

Steel Stocks Are Quietly Leading This Market: Is It Too Late To Buy?
3 Chip Stocks Suited Nicely For Income Investors
5 Major Tech Players Competing With ChatGPT Technology