Equity-income mutual funds almost matched the performance by the broad market in the form of the S&P 500 over the past 10 years.
The S&P 500 index outperformed equity-income funds as a group over the past decade by averaging a 7.07% yearly gain. That topped the 6.22% average annual gain by equity-income funds.
Equity-income funds outperformed during most of the Great Recession. They had better quarterly returns as a group from the fourth quarter of 2007 through Q1 2009. And they were close during the rest of 2009.
That's what you expect from equity-income funds. In a market downturn, the income they generate can cushion the blow to investors from declines in stock share prices or at least slower growth of shares.
But the broad market bogey came roaring back after the financial crisis. And it outperformed equity-income funds from Q2 2014 through Q4 2015.
Look how that adds up. It can give a nice little boost to your overall portfolio or to your retirement nest egg in particular.
If you had invested $10,000 in the S&P 500 on March 31, 2006, after 10 years your money would have grown into $20,047.
If you had invested the same amount in a cross-section of equity-income funds, it would have swelled to $18,531.
In that decade, the now-$520 million Nicholas Equity Income Fund (NSEIX) was the best-performing equity-income fund. It racked up a 9.70% average annual gain in that period.
Its 12-month yield is 2.16%. The big-cap bogey's yield is 2.10%.
Managed by Albert Nicholas since late 1993 and Michael Shelton since early 2011, the fund had 84% of its shareholders' money in U.S. stocks as of March 31. It had another 8.5% in foreign stocks, and the balance in cash and other types of assets.
Consumer cyclicals comprised the fund's largest sector, with a 26% weighting. Health care and technology were the next largest sectors, with weightings of about 14% and 15% respectively.
Six Flags Entertainment (SIX), a theme-park operator, is a recent holding that has helped the fund outperform despite a broad market that has been on a roller-coaster ride of its own for nearly six months.
Six Flags fell Thursday and Friday amid a broad market pullback. Even so, the stock is up 27% over the past 12 months. Its dividend yield is 3.8%.
The average 12-month dividend yield for all equity income funds is 1.94%.
On Wednesday the company reported a loss of 51 cents a share for Q1. Still, the outcome was better than seven analysts surveyed by Zacks Investment Research expected. Their consensus was for a 64 cent loss. And even with the loss, the results were better than the year-earlier quarter, when the company lost 75 cents a share.
Six Flag's Q1 revenue of $115.4 million also topped analysts' expectations.
EPS grew 52% 105% and 32% the past three quarters.
The stock has IBD's Composite Rating of 95. The Composite Rating combines IBD's five performance ratings, including EPS and Relative Strength ratings. Stocks poised to move higher often have a high Comp Rating.
AT&T (T) has been another nice performer for the fund. The telecommunication giant's shares are up 11% over the past 12 months.
EPS grew 11%, 14%, 15% and 11% the past four stanzas.
The stock has a 97 Comp Rating. Its dividend yield is 5%.
The company is in the midst of a push into Mexico's wireless phone market. America Movil (AMX) is the incumbent there. Analysts say AT&T's campaign is gaining traction.
McDonald's (MCD) (IBD) is up 32% in the past 12 months.
EPS rose 28%, 16% and 22% the past three quarters. That reversed four frames in a row of declining EPS. Still, revenue has fallen seven straight quarters.
The latest results, which came out last week, showed that the fast-food giant beat quarterly earnings and sales expectations as it continued to benefit from its all-day breakfast and McPick initiatives.
McDonald's has an 76 Comp Rating. Its dividend yield is 2.8%.
