Where Fund Managers Find The Best Yield

If you own dividend-paying stocks or funds that invest in them, now might be a good time to review your strategy. Fund managers see a shift coming as the Federal Reserve's quantitative easing winds down. Through May 31, the average equity-income fund was up 14.07% this year, according to Lipper Inc. That was neck-and-neck with the average U.S. diversified stock fund's 14.08% gain. Over the trailing three years, equity-income funds' average annual gain was 15.88% vs. 13.97% for U.S. diversified stock funds.

John Carey, manager of $1.4 billion Pioneer Equity Income Fund , favors companies that have strong free cash flow, strong balance sheets and histories of raising dividends. The Fed will raise rates when economic growth reaches certain thresholds. That will help banks like USBancorp (USB) and PNC Financial (PNC), Carey says. "They're large, domestically focused banks, selling at reasonable prices with potential for earnings growth when there's growth in the economy and in housing," he said. In the technology sector, Carey likes Automatic Data Processing (ADP). The payroll services provider can benefit from higher interest rates.

Source: Investors.com

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