Don't make the mistake of investing on yield alone. Alpine Dynamic Dividend (ADVDX) yields nearly 13%, but its aggressive strategy, which involves using leverage as well as betting on fast-growers and turnaround plays, has led to steep losses at times--exactly what you don't want from a dividend-focused fund. It dropped 49% in 2008 and another 16% in 2011, all while delivering subpar gains in rallies. Overall, its 7.5% annualized loss for the trailing five years through March 2012 is among the worst in the large-blend category. Investors may like the size of their income payouts, but they've lost a lot of money at times along the way.
To guide you to sounder income-oriented choices, I've screened our equity universe for equity funds with 12-month yields greater than 2.5% and included those with strong managements, fine long-term records, and moderate costs: Vanguard Equity-Income (VEIPX), Vanguard Wellesley Income (VWINX) and Allianz NFJ Dividend Value A (PNEAX).
Source: Morningstar
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