How Much Income Can Mutual Funds Generate?
There are many different types of mutual funds that pay dividends. Some funds focus on maximizing dividend yield, while others try to maximize overall return regardless. Other mutual funds only consider dividends as a secondary factor. Funds that focus on dividend stock investing tend to have the highest dividend yields.
American Funds, for example, has several mutual funds that payout dividends. It's Capital Income Builder fund's objective to provide current income that exceeds the average yield on U.S. stocks and to provide a growing stream of income. Growth of capital is a "secondary" objective.
The amount of dividends paid out by mutual funds varies from fund to fund. In fact, the amount of dividends paid changes over time even from the same mutual fund. As such, investors need to be prepared for such variations in generated income.
Capital Income Builder, for example paid dividend income of 42 cents per share, 45 cents per share, 45 cents per share, and 69 cents per share each quarter in 2010. A retiree with 10,000 shares of the fund would have seen income of $4,200, $4,500, $4,500 and $6,900 respectively each quarter.