Funds' Similarities End When It Comes to Dividend Yields

Andrew Daniels: Silver-rated ClearBridge Appreciation and Bronze-rated ClearBridge Dividend Strategy are similar in some respects. Both teams focus on finding high-quality large-cap firms with strong balance sheets and superior management teams. Both also emphasize risk-control, leading them to hold up well in choppy markets and post solid risk-adjusted returns. However, Dividend Strategy specifically targets firms with higher dividend yields than the S&P 500's. In fact, as of March 2016, Dividend Strategy's 3% dividend yield was higher than Appreciation's 2.3% yield and the S&P 500's 2.4% yield. Not surprisingly, Dividend Strategy has significantly higher allocations to dividend-heavy consumer staples and utilities stocks.

The managers of Dividend Strategy are also more concerned with finding stocks that are cheap on an absolute basis, so it lands in the large-value Morningstar Category, while Appreciation lands in the large-blend category. Appreciation has lower fees than Dividend Strategy, and hence earns a Positive Price rating, while Dividend Strategy has a Neutral Price rating. Overall, both funds are solid options for cautious investors, but investors looking for current income may be better suited with ClearBridge Dividend Strategy.