Stock Mutual Funds That Pay Monthly Dividends

Stock Mutual Funds That Pay Monthly Dividends. People invest to grow their wealth and pay for major expenditures such as college, travel, and the big one -- retirement. Employed individuals use their earnings to meet everyday expenses and save for the future. There are times, however, when additional funds are needed. Retirees count on monthly checks from mutual funds and other savings vehicles to supplement their income.

Savings produce income when retired to fund everyday and special expenses, including travel.

Equity Income Mutual Funds

Most mutual funds structured to provide regular payments are composed of fixed income securities. These debt instruments comprise corporate bonds, municipal bonds, Treasury notes and bonds, government agency securities, commercial paper and certificates of deposit. Mutual funds composed of equity securities with the objective of also providing income are categorized as equity income funds or balanced funds. Most contain a combination of stocks and bonds and distribute income quarterly.

Monthly Payment Funds

Mutual fund companies and insurance companies created funds offering monthly distributions targeted toward providing supplemental income to retirees. Some of these funds distribute only dividend and interest payments, retaining the principal with the objective of conserving the investor's wealth. Other monthly payment funds distribute not only the income but, over a period of time, all of an investor's holdings in the fund.

Payment Options

Many of the regular payment plan funds offer the investor a number of payout choices, including monthly or quarterly payments. The amount varies from about 3 percent to 7 percent, depending on the fund's objectives and whether or not only income, or income and total holdings are paid out.

Monthly Income Funds

Fidelity Investments' Income Replacement Funds distribute the income and eventually the total investment. Fidelity's funds are composed of both equities and bonds. Vanguard offers three funds with monthly payout programs: the Vanguard Growth Focus, Vanguard Growth and Distribution, and the Distribution Focus fund. Schwab also offers three income payout mutual funds: the Schwab Monthly Income Max Payout, the Schwab Monthly Enhanced Payout Fund, and the Schwab Monthly Income Modified Payout Fund. The mutual fund and brokerage firms Russell Investments, DWS Scudder, T. Rowe Price, MFS, and Legg Mason provide monthly income funds. Insurance companies Allianz and ING have similar funds. Many of the monthly income funds are funds of funds. This means the mutual fund is composed of at least two other funds, an equity and a bond fund.

Additional Suggestions

There are a number of exchange-traded funds, ETFs, offering monthly payments. The Powershares Hi-Yield Equity Dividends Achiever is one of them. There are also closed-end funds that offer monthly payments, but they are mainly bond funds. Closed-end funds are mutual funds trading on stock exchanges.


  • Marketwatch; Checks and Balances: Managed payout funds; March 5, 2008