Market Overview

Even With Dividend Funds, Watch The Volatility

Even With Dividend Funds, Watch The Volatility

Oil and gas pipeline stocks took a tumble as global crude prices fell.

Energy stocks are often popular with investors because they offer reliable dividends and high yields, but investors face not only stock market risk with these stocks, but also commodity risk.

A weekly chart of Kinder Morgan Partners LP (NYSE: KMP) illustrates the volatility common to oil and gas stocks.

Although this is a large cap, with a market capitalization of $40.84 billion, the chart has some wide weekly price swings. It slumped 5.11 percent the week ended October 10, ending the week below its 50-day moving average.

The annualized dividend yield of 6.2 percent appears attractive, but the stock is at the mercy of many factors outside management's control.

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The MainStay Epoch Global Equity Yield Fund (MUTF: EPSYX) holds only 0.15 percent of outstanding Kinder Morgan shares, but that accounts for 1.26 percent of fund holdings.

As the name suggests, the fund seeks a high level of income with price appreciation being a secondary consideration.

The Mainstay funds are operated by New York Life. The Epoch Global Equity Yield fund is sub-advised by Epoch Investment Partners. Michael Welhoelter and William Priest have been managing the fund since its inception, and they work with three additional co-managers.

The fund has a net asset value of $19.37, and a year-to-date decline of 0.67 percent. It peaked in July, and has been trending lower since.

This fund's expense ratio is 0.80 percent, and the fund has net assets of $4.5 billion.

Its three-year return, as of September 30, was 56.6 percent.

In addition to Kinder Morgan, oil and gas holdings include Royal Dutch Shell PLC (NYSE: RDSA), Statoil ASA (NYSE: STO), Targa Resources Partners LP (NYSE: NGLS) and Markwest Energy Partners LP (NYSE: MWE).


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