The 10 Best Dividend Funds to Buy Now

Columbia Dividend Income Fund

Expenses: 1.02%*
Minimum Investment: $2,000*
Dividend Yield: 1.5%

The very first thing to know about dividend funds is that they all don’t offer high levels of income. The Columbia Dividend Income Fund (LBSAX), for instance, yields just 1.5% compared to 1.9% for the S&P 500.

So why bother?

Because dividend-focused funds aren’t always about the yield. In many cases, targeting companies that also pay dividends acts as a quality screener of sorts. To wit, LBSAX and other share classes of the fund invest in companies with “strong and growing free cash flow” with a dual goal of “providing consistent yields and capital appreciation.”

It doesn’t look much different than other large-cap funds or indices; top holdings include your typical dividend-paying blue chips, such as Microsoft Corporation (MSFT) and JPMorgan Chase & Co. (JPM). But this simple strategy has led several of its share classes to outperformance against the S&P 500 over the past decade.

And share class does matter. The basic A shares, while earning four out of five stars from Morningstar, have actually underperformed thanks to expenses and other charges. But other, cheaper share classes have outdone the index and earned Morningstar’s top five-star ranking.

* Columbia Dividend Income’s A-Class shares include a 5.75% sales charge (“load”). Other share classes, available depending on the type of investor and the type of account you’re using, may have different expenses, loads and minimum investments.