Top Income Equity Funds - Mutual Fund Commentary

Today we are featuring top-performing “Income" equity mutual funds, which primarily invest in equity securities of companies that produce income for shareholders. They are considered less risky as they tend to invest in companies that are both established and creditworthy.

Investors can find such income funds by checking out the entire list of the Zacks #1 Rank Income Equity Funds.

5 Great Income Opportunities

Oppenheimer Capital Income A (OPPEX) was incepted in December 1970. This income fund seeks a high level of current income.

At least 65% of the income fund’s assets are invested in equity and debt securities that have the potential to generate income. The fund looks at holding debt as well as equity securities. Equity securities include dividend-paying common stocks, preferred stocks and securities convertible into common stock of domestic and foreign issuers, with different capitalization ranges. Debt securities include corporate and government bonds and foreign and domestic debentures.

The income fund has an expense ratio of 1.03% against a category average of 0.86%. As of August 2009, it has a portfolio turnover of 92% against a category average of 75%. The fund’s top holdings include Oppenheimer Institutional Money Market E, Merck & Co Inc. and Everest Re Group, Ltd. For the 1-year period ended August 31, 2009, the fund outperformed its benchmarks, the S&P 500 Index and the Russell 3000 Value Index.

Michael Borre has been lead manager of the fund since April 2009. Borre is a Chartered Financial Analyst and has been a vice president of Oppenheimer funds since April 2009.

Eaton Vance Dividend Income A (EDIAX) seeks to achieve total return for its shareholders. It was incepted in November 2005.

The majority of the income fund’s assets are invested in common and preferred stocks that pay dividends. At least 80% of its net assets are invested in dividend-paying common and preferred stocks. 25% or more of the fund’s assets could be invested in the utilities and financial services sectors. It may also invest up to 35% of its assets in foreign securities.

The income fund has an expense ratio of 1.31% against a category average of 1.27%. As of October 2009, it has a portfolio turnover of 177% against a category average of 75%. The fund’s top holdings include BP Plc ADR, Diamond Offshore Drilling, Inc. and Annaly Capital Management, Inc. The fund lagged the Russell 1000 Value Index for the 12 months ending October 31, 2009.

Aamer Khan has been lead manager of this income fund since November 2005. Before joining Eaton Vance in 2000, Khan was a Strategist and Equity Analyst at Investa Capital.

RiverSource Dividend Opportunity A (INUTX) seeks a high level of current income with capital appreciation as a secondary objective. It was incepted in August 1988.

At least 80% of the income fund’s assets are invested in companies in the utilities sector. The ownership or operation of facilities used to produce or supply electric power, natural gas, water, sanitary services, telecommunications, and other communications services constitute the primary operations of such companies. The income fund invests in common and preferred stocks, convertible securities, and investment grade bonds. It may invest up to 25% of its total assets in foreign securities.

The income fund has an expense ratio of 1.05% against a category average of 1.27%. As of September 2009, it has a portfolio turnover of 21% against a category average of 75%. The fund’s top holdings include Chevron Corporation, BP Plc ADR and Lorillard, Inc. As of June 2009, the fund had maintained a net dividend yield greater than that returned by the S&P 500 Index for the 1-year period.

Laton Spahr has been lead manager of the fund since February 2004. Spahr is a Chartered Financial Analyst and joined RiverSource Investments in 2001 as a security analyst.

Federated Market Opportunity A (FMAAX) seeks to achieve high current income and moderate capital appreciation. It was incepted in December 2000.

This income fund primarily invests in domestic and foreign equity securities, including convertible securities, of companies that are undervalued or out of favor. It also invests in securities that appear to have low share price volatility during periods of great market uncertainty. It selects securities based on valuation, sentiment, and technical considerations. The fund may invest in commodities by investing in a derivative or other such financial instruments.

The income fund has an expense ratio of 1.30% against a category average of 0.86%. As of October 2009, it has a portfolio turnover of 191% against a category average of 75%. The fund’s top holdings include GML Agricultural Commodity Trade Finance Fund, Russell 2000 Mini Dec 09 and PowerShares DB Agriculture. The Fund’s Class A shares significantly outperformed the S&P 500 Index for the year ending October 31, 2009.

Steven J. Lehman has been lead manager of the fund since December 2000. Lehman is a Chartered Financial Analyst and joined Federated in May 1997 as a portfolio manager and vice president of the fund's adviser.

Alpine Dynamic Dividend (ADVDX) seeks high current income as well as long-term capital appreciation. It was incepted in September 2003.

At least 80% of the income fund’s assets are invested in the equity securities of domestic and foreign companies that pay dividend income. The income fund focuses on those securities that pay qualified dividend income, which is a dividend received during the taxable year from domestic and qualified foreign corporations.

The income fund has an expense ratio of 1.19% against a category average of 1.08%. As of July 2009, it has a portfolio turnover of 596% against a category average of 79%. The fund’s top holdings include ITC Holdings, Microsoft and Mitsubishi Corporation. The fund recorded lower total returns than the broader S&P 500 Index and the Lipper Equity Income Averages for the six- and twelve-month periods for the fiscal year 2009.

Jill Evans has been lead manager of the fund since September 2003. Before joining Alpine in 2003, Evans was a senior equity research analyst at J.P. Morgan Securities.

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