Top 5 Equity Income Funds - Mutual Fund Commentary

Equity funds whose primary objective is income generation offer an additional choice to investors who choose regular income over long term-capital appreciation. A portfolio providing income as well as holding equities also offers better diversification. A steady income stream from regular dividends also helps to soften the impact of falling stock prices. Funds holding income generating equity securities offer a convenient route to investors looking to hold a well diversified portfolio.

Below we will share with you the 5 highest yielding Zacks #1 ranked equity income funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect the fund to outperform its peers in the future. To view the Zacks Rank and past performance of all equity income funds, then click here.

Eaton Vance Dividend Income A (EDIAX) seeks current income and capital growth. The majority of its assets is invested in common and preferred stocks paying dividends. On occasion it may invest up to 25% of its assets in the utilities sector and a similar share in financial services. The equity income fund returned 26.06% in the last one year period.

The equity income fund has a minimum initial investment of $1,000 and an expense ratio of 1.33% compared to a category average of 1.30%.

American Century Equity Income (TWEIX) invests primarily in equity securities with proven track records of paying out regular dividends. The fund seeks out securities which are undervalued and whose price rise appreciably. The equity income fund has a five year annualized return of 3.75%.

As of March 2010, this equity income fund held 71 issues, with 6.49% of its total assets invested in ExxonMobil Corporation.

Neuberger Berman Equity Income A (NBHAX) seeks total return. The majority of its assets are invested in equity securities which generate income. This includes convertible securities, common stocks and master limited partnerships. The equity income fund returned 40.72% in the last one year period.

Alexandra Pomeroy is the fund manager and she has managed this equity income fund since 2006.

American Funds Income Fund of America A (AMECX) invests heavily in dividend paying securities. It uses at least 60% of its assets to purchase equity securities but may also invest in debt. Not more than 25% of its assets may be invested in foreign securities excluded from the S&P 500 Composite Index. The equity income fund has a ten year annualized return of 5.7%.

The equity income fund has an expense ratio of 0.63% compared to a category average of 1.02%.

Fidelity Equity-Income II (FEQTX) invests the majority of its assets in income equity securities which generate income. The fund may also purchase other types of equity securities and invest in debt. It invests in both domestic and foreign securities. The equity income fund returned 42.03% in the last one year period.

The Fund Manager is Stephen R. Petersen and has managed this equity income fund since 2009.

To view the Zacks Rank and past performance of all equity income funds, then click here.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at www.zacks.com/funds/mutualfund/