American Funds Capital Income Builder Remains a Strong Dividend-Oriented Offering

Key Morningstar Metrics for American Funds Capital Income Builder

Morningstar Medalist Rating: Bronze

Process Pillar: Above Average

People Pillar: Above Average

Parent Pillar: High

American Funds Capital Income Builder CAIBX features a strong team plying an effective, disciplined approach.

The strategy currently has 12 equity managers and two fixed-income managers. The most recent additions were Saurav Jain and Brian Wong, both disclosed as equity managers at the start of 2025. Jain has managed a portion of another fund that invests primarily in dividend-paying stocks, American Funds Developing World Growth & Income DWGAX, since 2019. Another equity manager, Philip Winston, stepped off the strategy on Aug. 1, 2025, and is set to retire from the firm. Although departures and additions are somewhat common, the current group averages 11 years’ tenure on the fund. Each manager runs separate pieces of the strategy, along with several undisclosed managers and a group of equity analysts.

The strategy effectively balances income generation and capital appreciation. It typically invests 70% to 80% of its assets in global equities and the remainder in bonds. That split varies based on the team’s views of valuations and macroeconomic conditions, though sizable shifts are rare. The large cohort of managers could water down returns, but the correlation of excess returns between the managers’ portfolios has been modest. The bond portfolio aims to both boost income and serve as ballast and has typically stanched losses during selloffs.

The fund’s yield before fees typically ranks in the upper echelon of the global moderately aggressive allocation Morningstar Category peers. However, the managers thoughtfully consider where to source income and actively manage yield expectations. For example, they cut the portfolio’s payout in 2021 by roughly 20% owing to low bond yields and declining stock dividends at the time. And even though bond yields have since risen sharply, the managers still maintain a flexible approach that generates yield from other sources: The equity portfolio will still tilt toward higher-yielding areas. For example, non-US firms typically make up close to half of the stock portfolio, and sectors such as consumer staples, utilities, and telecoms are often overweight relative to the MSCI All Country World Index.

The strategy’s results can diverge from the broad market when high-yielding equities go in and out of favor. Indeed, the A shares lagged the benchmark for its now-old category, global allocation, each calendar year from 2015 through 2020. But relative returns have since rebounded, and the fund has handily surpassed its typical peer and a blended benchmark (70% MSCI ACWI High Dividend Yield Index and 30% Bloomberg US Aggregate Bond Index) that better reflects how it invests over most trailing periods. The fund also beat its typical peer on a risk-adjusted basis (as measured by Sharpe ratio and alpha) in its new Morningstar Category as of Oct. 1, 2025—global moderately aggressive allocation—in most periods up to 20 years.

Performance Highlights

This strategy has delivered of late, as well as over most longer periods.

The stock portfolio tilts toward higher-yielding areas such as utilities, consumer staples, and telecom, which underperformed the MSCI ACWI by wide margins in recent years. And its yield mandate largely precludes it from owning most growth giants that soared for most of the 2009-20 period, such as Amazon.com AMZN. The strategy has been able to own some growthy dividend-payers such as Microsoft MSFT, but firms that have long paid substantial dividends, such as British American Tobacco BATS, badly lagged the market during that period.

The portfolio’s fortunes have turned because of strong security selection and because value stocks have outperformed their growth counterparts for much of the five years through September 2025. During that period, the fund’s A shares outperformed roughly two-thirds of its peers on both a total-return and risk-adjusted basis. The fund also beat a 70% MSCI ACWI High Dividend Yield Index/30% Aggregate Index blend that better reflects how the managers invest. The fund moved to the new global moderately aggressive allocation Morningstar Category on May 1, 2025. It’s posted strong risk-adjusted returns relative to that new peer group, though it trails the category benchmark over most periods; the latter has benefited from a heavier weighting in US stocks.

The fund beat its typical new peer and the benchmark on most risk-adjusted measures for most periods up to 20 years.