Best Fidelity Funds for Dividends

High-Yield Stock Mutual Funds from Fidelity

fidelity dividend funds
Invest for income with Fidelity dividend funds. Getty Images

Fidelity offers some of the best dividend-paying mutual funds available on the market. Dividend funds typically invest in high quality stocks that pay dividends. These funds can make outstanding long-term investments and they can also be smart choices for current income in retirement.

Dividends can be received as a source of income or they can be used to buy more shares of the mutual fund. Long-term investors typically elect to have the dividends buy more shares of the fund but most investors who buy dividend mutual funds are usually looking for a source of income, which is to say that the investor would like steady and reliable payments from their mutual fund investment.

In most cases, because of their income-generating nature, dividend mutual funds are best-suited for retired investors.

Some investors use dividend mutual funds as alternatives to bonds and bond funds in low interest rate environments because they pay higher yields than bonds. However stocks carry higher risk of losing principal.

However, dividend mutual funds, which are often categorized with value stock funds, tend to be less aggressive (less risky) than other types of funds, such as growth stock mutual funds.

Best Fidelity Funds for Dividends

Yields will fluctuate but these three Fidelity funds have a history of paying above-average dividends for stock mutual funds:

  • Fidelity Equity Income (FEQIX) is an average performer in terms of annualized returns but the yields are among the highest for Fidelity stock funds. The fund primarily focuses its holdings in U.S. large-cap value stocks. The expense ratio for FEQIX is a low 0.71% and the minimum initial purchase is $2,500.
  • Fidelity Strategic Dividend & Income (FSDIX) is consistently among the best Fidelity funds for dividends. The portfolio is approximately two-thirds large-cap U.S. large-cap stocks and the remainder of the holdings are allocated among foreign stocks, bonds, cash and convertible securities. The expense ratio for FSDIX is low at 0.74% and the minimum initial purchase is $2,500.
  • Fidelity Equity Dividend Income (FEQTX) is another fund that doesn't often lead the category averages in performance but does exceedingly well at focusing on producing income for investors with dividends. The portfolio allocation averages about 90% U.S. stocks and 10% foreign stocks. The capitalization focus is on large-caps with a slice in mid-caps. The expense ratio for FEQTX is low at 0.72% and the minimum initial purchase amount is $2,500.

As an income alternative to dividend-paying stock funds, Fidelity also has a strong selection of high-yield bond funds.

Investors should keep in mind that, although dividend mutual funds may pay good yields, there is always principal risk involved with these investment securities.

Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.