3 Dividend Picks for Mutual Fund Investors

Dividend mutual funds provide us with two ways to earn a return: stocks’ normal price appreciation potential, as well as dividend income. And they do so while also providing instant diversification with the purchase of a single investment.

The best dividend mutual funds, at least in our view, do all that in a better manner than their peers while also charging competitive fees.

While dividend equities are sometimes maligned as sleepy stocks, we shouldn’t … well, sleep on them. Sure, they sometimes have lower upside ceilings than their growthier counterparts. But in good times, their cash income helps bolster that upside; in bad times, it can help offset losses. Either way, dividends are a powerful contributor to portfolio returns, accounting for (depending on what study you’re reading) anywhere between 25% and 40% of the S&P 500’s historical returns.

But if you don’t have the time nor the inclination to research and manage a portfolio of dividend stocks … well, you’re hardly alone. That—and the implicit admission that professional portfolio managers and well-built indexes can do it better—is why trillions of dollars are invested in dividend mutual funds.

Today, I want to introduce you to some of the best dividend funds you can buy. This list has been compiled with many needs in mind—each investor has their own goals, risk tolerance, and time horizon—so I’m examining a variety of mutual fund strategies to ensure that most people reading this can find something that’s appropriate for their unique needs.

Disclaimer: This article does not constitute individualized investment advice. Individual securities, funds, and/or other investments appear for your consideration and not as personalized investment recommendations. Act at your own discretion.

How Were the Best Dividend Funds Selected?

My goal here is both high-quality (of funds) and high variety (of strategies). So, like I do with most of my reviews, I began my search by booting up Morningstar Investor and running a quality screen I customize for each article. In this case, I looked for only mutual funds that have earned a Morningstar Medalist Rating of Gold, Silver or Bronze.

Morningstar has two ratings systems—the Star ratings and the Medalist ratings. I prefer screening for the latter, as they’re a forward-looking analytical view of the fund rather than just a backward look at performance. Per Morningstar:

“For actively managed funds, the top three ratings of Gold, Silver, and Bronze all indicate that our analysts expect the rated investment vehicle to produce positive alpha relative to its Morningstar Category index over the long term, meaning a period of at least five years. For passive strategies, the same ratings indicate that we expect the fund to deliver alpha relative to its Morningstar Category index that is above the lesser of the category median or zero over the long term.”

Note: A Medalist rating doesn’t mean Morningstar is necessarily bullish on the underlying asset class or categorization. It’s merely an expression of confidence in the fund compared to its peers. 

To narrow the list further, I also required the following:

• Minimum trailing 12-month yield of 2%: Mutual fund yields are calculated by adding up the prior 12 months’ worth of dividends and dividing by share price. The S&P 500, for instance, yields 1.2% currently. This list is built for people who are prioritizing a substantially higher dividend yield than what the market provides, so all funds included here must pay at least 2%, though several pay above 3% and even 4%. (This does eliminate a certain variety of dividend fund, which I’ll talk about after the picks.)
• Low fees: Expenses must be considered either “Below Average” or “Low” (so, the two least expensive quintiles) for the fund’s Morningstar category.
• No loads: I excluded funds that charge additional fees, such as sales “loads.” For instance, if you invested $10,000 in a mutual fund with a 5% front-end load, the mutual fund provider would immediately take $500 out in fees—meaning you’d already be starting from behind, investing just $9,500 (and not $10,000) at the outset.
• Reasonable investment minimums. The maximum investment minimum for inclusion is $5,000, but no fund on this list requires that much. Currently, the highest minimum is $3,000, while a few funds have no minimum whatsoever—you can invest for as little as $1. Note: Some fund providers explicitly lay out lower investment minimums for specific accounts, such as individual retirement accounts (IRAs).
• Broad availability: Many mutual funds have several share classes, many of which are limited to certain types of accounts, like, say, only for 401(k)s or only for wealth management clients. All funds here are Investor-class or other shares that are generally considered to be widely available to retail investors.

From the resulting list of dividend mutual funds, I hand-picked a group of products that represent numerous strategies: broader catch-all dividend portfolios, sector funds, international dividend plays, and more. 

Related: The 13 Best Mutual Funds for the Rest of 2026

The Best Dividend Mutual Funds to Buy Now

The following represent three picks from my broader list of the best dividend mutual funds you can buy at the moment. My hope here is simple: I want you to be able to find at least one dividend fund (if not more) that fits within your own set of investing needs.

If you do decide to continue your research and eventually invest in one of these (or any!) funds, please keep the following in mind:

• All of these funds have no loads, but brokerage commission fees might apply; check your brokerage before purchasing.
• Your brokerage might require a larger minimum initial investment for mutual funds than the fund itself requires.
• Some brokerage accounts might not let you purchase certain funds, even if they’re generally available to retail investors. (For instance, you might be able to buy the completely made-up Woodley Investments Large-Cap Fund at Schwab, but not at Fidelity.)

Lastly, I am not ranking these funds—every pick on here rates as excellent already. I’m instead listing them in a natural progression of various portfolio needs, starting broadly with different stock flavors and ending with a few bond funds.

With all that out of the way, let’s look at the best dividend funds you can buy.

Related: The 16 Best ETFs to Buy for the Rest of 2026

Vanguard High Dividend Yield Index Fund Admiral Shares

• Style: U.S. high-yield dividend stock
• Management: Index
• Assets under management: $99.2 billion
• Dividend yield: 2.2%
• Expense ratio: 0.08%, or 80¢ per year for every $1,000 invested
• Minimum initial investment: $3,000
• Morningstar Medalist rating: Gold

The Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX) is exactly what the median investors is looking for out of a dividend mutual fund. It’s inexpensive. It delivers an above-market yield. And it’s full of big, familiar stocks.

The Gold-rated VHYAX tracks the FTSE High Dividend Yield Index, which starts with a wide universe of large-, mid-, and small-cap stocks, then eliminates the bottom half of stocks by expected 12-month yield. The remaining dividend stocks are then “weighted” by size, which means the larger their market cap, the more assets are invested in that stock.

The result is a portfolio of 605 stocks that leans heavily toward big, blue-chip companies. Large-cap stocks* account for more than 65% of assets; mid-caps enjoy a 25% allocation, and smalls inherit the rest. Top holdings include mega-cap dividend stocks even beginners would be familiar with, such as JPMorgan Chase (JPM) and Exxon Mobil (XOM), that pay higher-than-average yields. 

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Vanguard High Dividend Yield Index Fund also provides decent diversification across sectors. It’s heavily weighted in financial companies at more than 20% of assets. However, three other sectors—technology, healthcare, industrials, and consumer staples—also enjoy double-digit allocations, and most other sectors are weighted in the high single digits.

One sector you won’t see, however, is real estate. Why? Most stocks pay “qualified” dividends, which are taxed at more favorable long-term capital gains tax rates (0%, 15%, or 20%). However, real estate investment trusts (REITs) generally pay non-qualified dividends, which are treated like ordinary income and subject to marginal tax rates.

Still, VHYAX delivers exposure to hundreds of mostly big, stable companies that pay out relatively generous dividends. That makes it one of the best dividend funds to buy if you’re just trying to improve your level of portfolio income without adding too much concentration in any one corner of the market.

Note: Many Vanguard mutual funds are also available as exchange-traded funds (ETFs). That includes Vanguard High Dividend Yield Index Fund, which also trades as the Vanguard High Dividend Yield ETF (VYM, 0.04% expense ratio). You can currently buy VYM for around $165 per share.

* There are different ways to define “cap” levels. We’re adhering to Morningstar’s definition, which says the largest 70% of companies by market capitalization within a fund’s “style” are large caps, the next 20% by market cap are mid-caps, and the smallest 10% by market cap are small caps.

Related: 7 Best Vanguard Dividend Funds [Low-Cost Income]

Fidelity Select Pharmaceuticals Portfolio

• Style: U.S. industry (Pharmaceuticals)
• Management: Active
• Assets under management: $1.6 billion
• Dividend yield: 2.6%
• Expense ratio: 0.67%, or $6.70 per year for every $1,000 invested
• Minimum initial investment: N/A
• Morningstar Medalist rating: Gold

The Fidelity Select Pharmaceuticals Portfolio (FPHAX) is a play on the part of the healthcare sector that creates life-improving (and sometimes life-saving) treatments. Healthcare is one of the most well-rounded sectors, but the defensive and income elements tend to come from big, cash-rich drug companies that historically pay bigger dividends than some of the “growthier” parts of the sector.

Of course, technically, manager Karim Suwwan de Felipe focuses on more than just one industry within the healthcare sector: Pharmaceuticals make up the lion’s share of assets (~80%), with virtually all of the rest going toward biotechnology companies. The difference, of course, is in the types of treatments—pharmaceuticals use chemical compounds while biotechs are based on living organisms. But otherwise, they’re extremely similar businesses and belong under the same umbrella.

Related: 14 Best Investing Research & Stock Analysis Websites [2026]

Right now, FPHAX owns 65 companies. Large caps command the majority of assets (65%), but the fund invests a healthy 15% or so in small companies, with the remaining 20% going to mid-caps. It’s not exactly a balanced portfolio from an individual-holding standpoint, either; weight-loss drug giant Eli Lilly (LLY) accounts for more than a quarter of assets all by its lonesome, and the U.K.’s GSK (GSK) is just under 10% of assets.

But big bets have often paid off for Suwwan de Felipe, whose fund performance ranks within the top 10% of the category competition across the trailing five- and 10-year time frames, and among the top quarter over the past three and 15 years. Meanwhile, the presence of several blue-chip pharma names helps throw off a solid yield well north of 2%.

Related: 10 Monthly Dividend Stocks for Frequent, Regular Income

Northern International Equity Index Fund

• Style: International large-cap blend stock
• Management: Index
• Assets under management: $7.0 billion
• Dividend yield: 3.2%
• Expense ratio: 0.10%*, or $1.00 per year for every $1,000 invested
• Minimum initial investment: $2,500
• Morningstar Medalist rating: Silver

I frequently point out that while the U.S. has historically been one of the world’s most fruitful stock markets, it’s not invulnerable. Sometimes, like in 2025, international markets will outperform us. That’s why financial advisors will suggest at least a little geographic diversification in the form of stocks and/or bonds from outside our borders.

But if you’re an income hunter, you have another reason to pull out your globe while you invest: dividends. That’s because blue-chip stocks from other developed markets (such as western European countries and Japan) tend to pay noticeably more than their American counterparts.

Related: 8 Best Stock Portfolio Tracking Apps [Portfolio Trackers]

The Northern International Equity Index Fund (NOINX) tracks the popular MSCI EAFE Index, comprising equities from 20-plus nations across three of the world’s most developed regions: Europe, Australasia, Far East (aka EAFE). Significant assets are allocated to firms from Japan, the U.K., and France; Germany and Switzerland have sizable presences, too.

This far-reaching index currently spans around 675 companies weighted by market cap, so blue chips such as ASML Holding (ASML), Nestlé (NSRGY), and BHP Group (BHP) have more pull than the rest. In fact, large caps make up roughly 90% of the portfolio, with the remaining 10% allocated to larger mid-cap stocks. This emphasis on gigantic multinationals gives NOINX a defensive stance and explains the fund’s high yield above 3%.

There’s nothing flashy about this Silver-rated Northern International index fund. But it’s effective, having beaten its category average over every meaningful medium- and long-term time frame. And it’s cost-effective—at just 10 basis points in annual expenses, NOINX is wildly cheaper than the foreign large-cap category average expense of 88 basis points. (A basis point is one one-hundredth of a percentage point.)

* 0.16% gross expense ratio is reduced with a 6-basis-point fee waiver until at least July 31, 2026. As of this writing, Northern Trust had not indicated whether the waiver will be extended.

Related: How to Rebalance Your Portfolio: A Quick Guide

Learn More About These and Other Funds With Morningstar Investor

If you’re buying a fund you plan on holding for years (if not forever), you want to know you’re making the right selection. AndMorningstar Investor can help you do that.