Dividends4Life: Dividend Funds Diversify

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Dividend Funds Diversify

Posted by D4L | Wednesday, August 03, 2011 | | 0 comments »

After sticking with more traditional options for years, mutual funds that specialize in dividends are moving into unconventional sectors, hoping to find higher yields in historically volatile areas like tech and energy. According to a screen done for SmartMoney by fund researcher Morningstar, dividend funds have cut their holdings of financial stocks by almost 30% in the past five years, investing instead in a broad range of sectors like tech, consumer staples, health care and energy.

Five years ago, the typical dividend fund was weighted more than 10% in only two sectors: financials and industrials, at 23% and 13% respectively. Today, the average fund has 10% or more of its assets in each of six different sectors. Meanwhile, other sectors have built up cash and are willing to pay. So far this year, 17 technology companies have initiated or raised dividends. Dividend-paying companies tend to be the most stable in any given area, says Christopher Davis, a Morningstar fund analyst.

Source: Wall Street Journal

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