Susan Wasserman: Lead manager Meggan Walsh and her team run two large-value funds that take different approaches to dividend investing.
Bronze-rated Invesco Dividend Income has an explicit dividend focus, and stocks that make it into this fund must yield at least 2%, though most names yield much higher than that. The fund began as a utilities fund, but Invesco eliminated the utilities focus in February 2013. The fund can now invest across sectors; however the makeup of the fund is still heavily weighted toward defensive areas. About 19% of assets are in utilities and another 16% are in consumer staples. As a point of comparison, the typical large-value fund holds roughly 5% in utilities and 8% in consumer staples. The fund is much lighter in financials and energy than the typical peer.
Silver-rated Invesco Diversified Dividend does not have an explicit dividend focus, so stocks in this portfolio do not have to have a 2% yield. But almost all names generate high levels of free cash flow and are growing dividends. This fund is just as defensive as Invesco Dividend Income, but the team weights more toward consumer staples than utilities. This fund's mandate dates back to late 2001.
Invesco Dividend Income has paid a monthly distribution since March of 2013. Invesco Diversified Dividend has paid a quarterly distribution since Walsh took over in late 2002. Dividend Income may be more suitable for those investors looking for a steady income stream, but Walsh and her team have capably carried out both mandates, delivering peer-beating total and risk-adjusted returns over their tenure.