What is the best mutual fund for dividends?

There are many good dividend mutual funds. Some funds focus on higher-yielding dividend stocks, while others concentrate on companies that can grow their dividends. The best dividend mutual fund for a retiree (higher-yielding dividend stocks) might not be the best one for a younger investor (dividend growth stocks). However, the Vanguard High Dividend Yield Index Fund is one of the best due to its broad, low-cost access to higher-yielding dividend stocks.

Are dividend mutual funds a good idea?

Dividend mutual funds can be a good idea. They enable investors to own a diversified portfolio of dividend-paying stocks to generate income and capitalize on stock price appreciation. Historically, dividend stocks have delivered higher returns than the average S&P 500 stock. That data suggests that a dividend-focused mutual fund can be a good investment.

Which mutual fund is best for monthly dividends?

Many of the top dividend mutual funds make quarterly distributions to investors. However, the Federated Hermes Strategic Value Dividend Fund pays investors monthly, making it one of the best mutual funds for those seeking monthly dividends.

Which fund has the highest dividend?

Mutual fund dividend yields can fluctuate from month to month based on the fund's price and the dividend income generated by its current holdings. As of early September 2026, the JPMorgan Equity Premium Income Fund (NASDAQMUTFUND: JEPA.X) had one of the highest dividend yields among income-focused mutual funds at 7.9% over the trailing-12-month period. The fund owns dividend-paying stocks and generates additional income by writing call options on the S&P 500.

Can I reinvest dividends from my mutual funds?

Yes, you can reinvest dividends from your mutual funds. Most funds offer a dividend reinvestment plan (DRIP) that automatically reinvests your mutual fund dividends.

5 Best High Dividend Mutual Funds to Buy in 2026

A closer look at some of the top dividend mutual funds for income-seeking investors.

By Matthew DiLallo – Updated Sep 10, 2026 at 4:03 PM EST | Fact-checked by Frank Bass

+Fool.comon

Key Points

Dividend mutual funds provide diversified income from dividend-paying stocks.
Top high-dividend mutual funds like Federated Hermes offer monthly income.
Review factors such as dividend yield and expense ratio when picking the best dividend mutual fund for you.

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How dividend mutual funds work

A mutual fund pools investor capital into a single investment vehicle. Here are a few notable characteristics of the way dividend mutual funds work:

Investment mandate: Mutual funds invest capital received from investors in stocks, bonds, or other assets in line with their stated mandate. For example, as the name implies, a dividend mutual fund invests in a diversified portfolio of dividend-paying stocks. That provides the fund with income to pay dividends to its investors, who can use the cash as they see fit, including reinvesting dividends to buy more shares of the mutual fund.
Fund types: There are two types of dividend mutual funds -- passively or actively managed. Passively managed dividend mutual funds are index funds that aim to track a particular dividend-related index. Meanwhile, actively managed dividend mutual funds buy and sell top dividend stocks to outperform a specific index.
Expense ratio: Whether active or passive, mutual funds charge their investors a management fee known as the expense ratio. Passively managed mutual funds usually have a lower expense ratio than actively managed funds. As a result, these mutual funds pay a higher percentage of their dividend income to investors than actively managed funds do.

With these factors in mind, here's a closer look at some of the top dividend mutual funds.

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Top high-dividend mutual funds to consider

Some mutual funds focus on owning stocks that pay dividends, especially those with high dividend yields. Funds geared toward this strategy usually make more frequent distributions, typically quarterly or, in some cases, monthly. We focused our dividend mutual fund search on those offering above-average yields or targeting companies known for delivering dividend growth.

Five standout dividend-focused mutual funds are:

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1. Federated Hermes Strategic Value Dividend Fund

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NASDAQMUTFUND: SVAAX

Federated Hermes Equity Funds - Federated Hermes Strategic Value Dividend Fund

Today's Change

(0.00%) $0.00

Current Price

$6.81

Key Data Points

Day's Range

$6.81 - $6.81

52wk Range

$6.81 - $6.81

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The Federated Hermes Strategic Value Dividend Fund (SVAA.X +0.00%) aims to generate income and long-term capital appreciation. It invests in stocks with higher dividend yields than a broad equity market index and with dividend growth potential. This actively managed mutual fund benchmarks its performance against the S&P 500 and the Dow Jones U.S. Select Dividend index.

As of early September 2026, the fund had $10 billion of assets under management (AUM) and held 46 stocks. The top five fund holdings were:

Paychex (NYSE:PAYX)
U.S. Bancorp (USB -0.93%)
Enbridge (ENB +0.49%)
British American Tobacco (BTI +0.76%)
TotalEnergies (TTE -0.66%)

The fund focuses on sectors known for paying attractive dividends. Its portfolio holdings by sector included financials (17.1% of its assets), utilities (14.8%), consumer staples (14.6%), healthcare (14.4%), and energy (11.1%).

The mutual fund had a weighted average dividend yield of 4.0%. That was considerably above the S&P 500's 1.1% dividend yield, which was around its lowest level in more than 20 years in mid-2026.

This dividend mutual fund generally has a minimum investment of $1,500. The relatively low minimum investment makes it easy for investors to start collecting passive income. A notable feature of this fund is that it pays dividends monthly.

The one mark against the fund is its expense ratio. With a net expense ratio of 0.81%, it's well above the mutual fund industry's average of 0.42%. The higher cost is the price investors pay for an actively managed fund that aims to deliver returns above a benchmark.

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2. Vanguard High Dividend Yield Index Fund Admiral Shares

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NASDAQMUTFUND: VHYAX

Vanguard Whitehall Funds - Vanguard High Dividend Yield ETF

Today's Change

(0.51%) $0.24

Current Price

$47.55

Key Data Points

Day's Range

$47.55 - $47.55

52wk Range

$47.55 - $47.55

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The Vanguard High Dividend Yield Index Fund (VHYA.X +0.51%) provides broad exposure to U.S. companies that have consistently paid above-average dividends. It emphasizes slower-growing, higher-yielding companies.

This passively managed mutual fund aims to track the returns of the FTSE High Dividend Yield index. The index tracks stocks of U.S. companies that have paid above-average dividends for the past 12 months, excluding real estate investment trusts (REITs).

As of early September 2026, the Admiral Shares class of this mutual fund had $17.7 billion of net assets and held 604 stocks. The top five fund holdings were:

Broadcom (AVGO -0.92%)
JPMorgan Chase (JPM -1.89%)
ExxonMobil (XOM +1.20%)
Johnson & Johnson (JNJ +0.27%)
Cisco Systems (CSCO +0.04%)

The fund had a 30-day SEC yield of 2.2% (more than double the S&P 500's yield at the time) and distributed dividends quarterly. Like the FTSE High Dividend Yield index, the fund weights heavily toward industries known for paying attractive dividends. Its top five sectors were financials (21.3% of the fund's holdings), industrials (14.1%), technology (13.9%), healthcare (12.5%), and energy (9.4%).

The passively managed mutual fund has an ultra-low expense ratio of 0.08%, well below the industry average. The fund also has a minimum investment of $3,000. It's worth pointing out that Vanguard offers a similar exchange-traded fund (ETF), Vanguard High Dividend ETF (VYM -0.59%), with a slightly lower expense ratio (0.04%) and a low minimum investment of one share (around $160 as of early September 2026).

3. Vanguard Equity Income Fund Investor Shares

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NASDAQMUTFUND: VEIPX

Vanguard Fenway Funds - Vanguard Equity Income Fund

Today's Change

(0.55%) $0.26

Current Price

$47.72

Key Data Points

Day's Range

$47.72 - $47.72

52wk Range

$47.72 - $47.72

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The Vanguard Equity Income Fund (VEIP.X +0.55%) aims to provide investors with above-average current income. It invests in U.S. companies that consistently pay high dividends. The actively managed mutual fund benchmarks its returns against the FTSE High Dividend Yield index.

As of early September 2026, the Investor Shares class of this mutual fund had $5.2 billion in assets and held 220 stocks. The top five fund holdings were:

Broadcom
Merck (MRK -0.06%)
Johnson & Johnson
Bank of America (BAC -2.17%)
Diamondback Energy (FANG -0.77%)

The fund had a 30-day SEC yield of 2.0% and distributed dividends quarterly. The dividend mutual fund also focuses on sectors known for paying attractive dividends. Its top five sectors were financials (21.5% of the fund's holdings), information technology (17.7%), healthcare (14.7%), industrials (10.9%), and energy (8.2%).

The mutual fund has an expense ratio of 0.26% (almost half the industry average) and a minimum investment of $3,000. Vanguard also offers a lower-cost version of the fund (Admiral Shares) with an expense ratio of 0.17%. However, it has a much higher minimum investment of $50,000.

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4. T. Rowe Price Dividend Growth

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NASDAQMUTFUND: PRDGX

T. Rowe Price Dividend Growth Fund, Inc.

Today's Change

(0.69%) $0.61

Current Price

$88.97

Key Data Points

Day's Range

$88.97 - $88.97

52wk Range

$88.97 - $88.97

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The T. Rowe Price Dividend Growth Fund (PRDG.X +0.69%) focuses on stocks with strong dividend records or that should increase their payouts over time.

As of early September 2026, the fund had $23.2 billion of assets and held 94 stocks. The top five fund holdings were:

Apple (AAPL -0.78%)
Microsoft (MSFT -1.35%)
Broadcom
JPMorgan Chase
Visa (V +0.10%)

The dividend mutual fund focuses on sectors known for paying growing dividends. Its top five sectors were information technology (25.9% of the fund's holdings), financials (20.2%), industrials and business services (14.0%), healthcare (13.3%), and consumer staples (6.7%).

The mutual fund has an expense ratio of 0.64% (above the industry average) and a minimum investment of $2,500 for the investor class shares. T. Rowe Price also offers a Dividend Growth ETF (TDVG -0.20%) with similar holdings at a lower expense ratio (0.5%).

5. BlackRock Equity Dividend

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NASDAQMUTFUND: MDDVX

BlackRock Equity Dividend Fund

Today's Change

(0.73%) $0.16

Current Price

$22.19

Key Data Points

Day's Range

$22.19 - $22.19

52wk Range

$22.19 - $22.19

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The BlackRock Equity Dividend Fund (MDDV.X +0.73%) owns a portfolio of large-cap U.S. value stocks. It strives to invest in companies with greater potential to increase dividends. It also aims to deliver lower-volatility returns.

As of early September 2026, the fund had $20.2 billion of assets and held 82 stocks. The top five fund holdings were:

Microsoft (MSFT -1.35%)
Amazon (AMZN -1.41%)
Apple
Merck & Co.
CVS Health (CVS -1.44%)

The BlackRock-managed fund had a yield of 1.2% and paid quarterly distributions to investors. The dividend mutual fund also focuses on sectors known for paying growing dividends. Its top five sectors were information technology (18.1% of the fund's holdings), financials (15.2%), healthcare (15.2%), consumer discretionary (12.4%), and industrials (10.7%).

The mutual fund has an expense ratio of 0.7% and a minimum investment of $1,000.

Types of dividend-paying mutual funds

There are several types of dividend-paying mutual funds, including:

Equity income funds.
High dividend yield funds.
Dividend growth funds.
Balanced funds.
REIT mutual funds.

Key factors to consider when choosing a dividend mutual fund

Investors should consider several factors when choosing which dividend mutual fund to buy, including:

Dividend yield: Ensure the fund's yield is high enough to meet your income needs.
Dividend growth rate: You should see whether the fund focuses on higher-yielding dividend stocks or on those with faster payout growth.
Long-term returns: Review the fund's performance relative to other dividend-focused funds.
Expense ratio: Look at a fund's expense ratio and see if there's a lower-cost fund with a similar yield and return potential.
Holdings: Review a fund's holdings to see what types of stocks it typically holds.

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The bottom line

Investors seeking passive income can use dividend mutual funds to achieve that goal. The strategy allows investors to own a diversified portfolio of dividend-paying stocks, which should help lower their risk. Although there are many dividend mutual funds, the Federated Hermes Strategic Value Dividend Fund, Vanguard High Dividend Yield Index Fund, Vanguard Equity Income Fund, BlackRock Equity Dividend Fund, and T. Rowe Price Dividend Growth Fund stand out as the top options for anyone seeking an attractive income stream. They range from those that provide monthly income (Federated Hermes) to low costs (Vanguard) to dividend growth (T. Rowe Price and BlackRock). That variety enables investors to match dividend mutual funds to their investment needs.

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Dividend mutual fund FAQ

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About the Author

Matt DiLallo has been a contributing Motley Fool stock analyst specializing in the energy, industrials, and real estate sectors since 2012. He also covers dividend-paying stocks, pre-IPO companies, ETFs, and other investing topics. He holds an MBA from Liberty University.

TMFmd19

@MatthewDiLallo

Citigroup is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Wells Fargo is an advertising partner of Motley Fool Money. Matt DiLallo has positions in Amazon, Apple, Broadcom, JPMorgan Chase, Johnson & Johnson, Prologis, and Visa and has the following options: short May 2026 $280 calls on Apple. The Motley Fool has positions in and recommends Amazon, Apple, JPMorgan Chase, Merck, Microsoft, Prologis, U.S. Bancorp, Vanguard High Dividend Yield ETF, and Visa. The Motley Fool recommends British American Tobacco P.l.c., Broadcom, Johnson & Johnson, and SS&C Technologies. The Motley Fool has a disclosure policy.

5 Best High Dividend Mutual Funds to Buy in 2026

A closer look at some of the top dividend mutual funds for income-seeking investors.

Key Points

How dividend mutual funds work

Top high-dividend mutual funds to consider

1. Federated Hermes Strategic Value Dividend Fund

Key Data Points

2. Vanguard High Dividend Yield Index Fund Admiral Shares

Key Data Points

3. Vanguard Equity Income Fund Investor Shares

Key Data Points

4. T. Rowe Price Dividend Growth

Key Data Points

5. BlackRock Equity Dividend

Key Data Points

Types of dividend-paying mutual funds

Key factors to consider when choosing a dividend mutual fund

The bottom line

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Best Mutual Funds to Invest in 2026

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About the Author

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Dividend mutual fund FAQ

What is the best mutual fund for dividends?

Are dividend mutual funds a good idea?

Which mutual fund is best for monthly dividends?

Which fund has the highest dividend?

Can I reinvest dividends from my mutual funds?

How dividend mutual funds work

Top high-dividend mutual funds to consider

1. Federated Hermes Strategic Value Dividend Fund

2. Vanguard High Dividend Yield Index Fund Admiral Shares

4. T. Rowe Price Dividend Growth

The bottom line

Related investing topics

Key Data Points

Key Data Points

Key Data Points

Key Data Points

Key Data Points

3. Vanguard Equity Income Fund Investor Shares

Types of dividend-paying mutual funds

Key factors to consider when choosing a dividend mutual fund

5. BlackRock Equity Dividend