Where's the Income?
Some fund names don't tell the full story.
Some fund names don't tell the full story.
Last week's Five-Star Investor homed in on some reliable dividend-paying funds for retirees. This week, we decided to aim the spotlight on stock funds that have "income" or "dividend" in their names but in actuality have not delivered much of either one.
Using the Premium Fund Screener, we started by filtering the domestic-stock fund universe for distinct portfolios of funds with income or dividend in their names. We then added a screen for trailing-12-month yields that were lower than 1.75%, which is the average yield that plain-vanilla S&P 500 index funds have delivered during the past year. Premium members can click here to replicate the screen. The screener yielded a number of funds; we highlight three funds that, contrary to their names, don't generate much, if any, income.
AllianceBernstein Growth & Income (CABDX)
Yield: 0.79% | Expenses: 1.16% | Load: 5.75%
This fund is on the slow track to recovery, but Morningstar analyst Katie Rushkewicz believes it is not worth the wait. Although lead manager Frank Caruso has been at the helm since 2004, the fund has had much turnover within the team since 2008. Moreover, performance, which closely tracks the Russell 1000 Value Index, has remained uninspiring. Using a mix of quantitative screens and fundamental research to find undervalued stocks, Caruso employs a consistent and disciplined process, but the fund has lagged its peer group in seven of the past nine calendar years.
Fidelity Advisor Growth & Income (FGIRX)
Yield: 0.23% | Expenses: 1.08% | Load: 5.75%
Manager James Catudal invests the bulk of this portfolio in blue-chip stalwarts that he believes have better-than-average growth prospects. Although he'll keep about 15% of the portfolio in names that aren't found in the S&P 500, he generally hews fairly closely to the S&P 500 index. Catudal also keeps the portfolio hyperdiversified, with more than 202 holdings. That could be a factor behind the fund's lackluster results during his tenure: Even if one holding does well, its stake is not significant enough to effect much positive change. Given the hefty price tag on this offering, investors are better off with an inexpensive index fund.
Putnam Fund for Growth & Income
Yield: 0.86% | Expenses: 1.16% | Load: 5.75%
This fund has undergone some major management changes in the past few years, with current manager Bob Ewing replacing Eric Harthun in 2008. To Ewing's credit, the fund managed to break into the top half of its category in his first two full years at the helm, 2009 and 2010. However, Ewing's results at previous charges have been so-so, making it difficult to recommend this offering over more battle-tested offerings in the category.
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