Best Fidelity Funds for Dividends

High-Yield Stock Mutual Funds from Fidelity

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Fidelity offers several income-oriented dividend mutual funds. Fidelity's best dividend funds can make outstanding long-term investments and they can also be smart choices for current income in retirement. Find out if dividend mutual funds are right for you and which Fidelity funds best fit your income objectives.

Why Invest in Dividend Mutual Funds

Dividend funds typically invest in high-quality, large-cap stocks that pay dividends. Dividends can be received as a source of income or they can be used as long-term growth of capital. To receive income from dividend mutual funds, the investor will typically elect to receive the dividend payments, either by check in the mail or by direct deposit to their bank account.

Because of their income-generating nature, dividend mutual funds can be appropriate investment choices for retired investors. Long-term investors looking for growth of capital typically elect to have the dividends buy more shares of the fund, rather than receiving the dividends now as income.

Some investors use dividend mutual funds as alternatives to bonds and bond funds in low-interest rate environments because they may pay higher yields than bonds. However, stocks carry a higher risk of losing principal, compared to bonds. Compared to other stock funds, dividend mutual funds, which are often categorized with value stock funds, tend to be less aggressive (less risky) than growth stock mutual funds.

3 Best Fidelity Funds for Dividends

When selecting the best fidelity funds for dividends, the primary measure to analyze is the fund's 30-day SEC Yield, sometimes referred to as the 30-day yield or the SEC Yield. In general a high yield can be considered one that is above average compared to other stocks or stock mutual funds.

To find the best Fidelity funds for dividends we looked at their domestic equity funds that they categorize as "income oriented," which are those that pay above-average dividends. We then selected the three with the highest yields .

Here are the best Fidelity funds that pay above-average dividends:

Fidelity Equity Dividend Income

Fidelity Equity Income (FEQTX) 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 that pay yields above the average yield on the S&P 500 index. Top holdings include Chevron Corp (CVX), Wells Fargo (WFC), and Johnson & Johnson (JNJ). The 30-day yield for FEQTX is 2.95% and the expense ratio is low at 0.60%. There is no minimum initial investment to get started investing with this fund.

Fidelity Growth and Income Portfolio

Fidelity Growth and Income Portfolio (FGRIX) 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. Top holdings include General Electric (GE), Microsoft (MSFT), and Exxon Mobil (XOM). The 30-day yield for FGRIX is 2.03% and the expense ratio is relatively low at 0.61%. There is no minimum initial investment to get started investing with this fund.

Fidelity Equity-Income Fund

Fidelity Strategic Dividend & Income (FEQIX) is consistently among the best Fidelity funds for dividends. The portfolio consists of large-cap value stocks with the highest concentration in financials and health care sectors. Top holdings include JP Morgan Chase (JPM), Berkshire Hathaway (BRK/B) and JNJ. The 30-day yield for FEQIX is 1.93% and the expense ratio is reasonable at 0.61%. There is no minimum initial investment to get started investing with this fund.

Bottom Line

Dividend funds from Fidelity can be smart investment choices for investors looking for current income or a combination of growth and income. Investors should keep in mind that, although dividend mutual funds may pay good or above-average yields, there is always principal risk involved with these investment securities.

As an income alternative to dividend-paying stock funds, Fidelity also has a strong selection of high-yield bond funds. As always, investors should keep in mind their tolerance for risk and their investment goals before choosing investments to add to a portfolio.

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.

Article Sources

  1. "Dividend Reinvestment." Accessed March 31, 2020.

  2. "Fidelity Mutual Funds." Accessed March 31, 2020.