High-grade corporate bonds often match yields from equity securities, even outperforming them on occasion. This is particularly true during an economic downturn when investors need not worry about losing out on share price appreciation. In this case, investing in bonds would provide good returns without the volatility associated with stocks. Again, corporate bonds carry higher risk compared to other securities in the bond category, but the risk is compensated by the higher return they provide. Mutual funds further lower the risk factor for investors by using a professional approach to create widely diversified portfolios.
Below we will share with you the 5 highest yielding Zacks #1 ranked corporate bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all corporate bond funds, then click here.
| Mutual Fund | SEC Yield |
| Principal Preferred Securities | 6.10% |
| Delaware Extended Duration Bond A | 4.82% |
| T. Rowe Price Corporate Income | 4.32% |
| Delaware Corporate Bond A | 4.28% |
| Invesco Income A | 4.05% |
Principal Preferred Securities A (PPSAX) seeks current income. It invests the majority of its assets in preferred securities issued by U.S. companies which are rated investment grade or higher. If the security selected is unrated, then it must be of similar quality. The corporate bond mutual fund returned 21.04% in the last one year period.
The corporate bond mutual fund has an expense ratio of 1.00% compared to a category average of 0.94%.
Delaware Extended Duration Bond A (DEEAX) invests the majority of its assets in corporate bonds rated investment grade or higher. Up to 20% of the fund’s assets may be used to purchase high-yield corporate bonds. The corporate bond mutual fund has a three year annualized return of 13.44%.
The Fund Manager is Thomas H. Chow and he has managed this corporate bond mutual fund since 2007.
T. Rowe Price Corporate Income (PRPIX) seeks income and to a lesser degree, capital appreciation. The fund invests at least 80% of its assets in corporate debt. Up to 10% of its assets may be utilized to purchase equity and convertible securities. The corporate bond mutual fund has a ten year annualized return of 5.53%.
The corporate bond mutual fund has a minimum initial investment of $2,500 and an expense ratio of 0.62% compared to a category average of 0.88%.
Delaware Corporate Bond A DGCAX) utilizes at least 80% of its assets to purchase investment grade corporate bonds. It may invest in convertible securities, warrants, common and preferred stock. Up to 20% of its assets may be used to purchase high yield corporate bonds. The corporate bond mutual fund has a five year annualized return of 7.72%.
As of August 2010, this corporate bond mutual fund held 280 issues, with 7.46% of its total assets invested in US LONG BOND DEC 2010.
Invesco Income A (AMIFX) seeks capital growth and current income. The fund invests heavily in U.S corporate bonds which are dollar denominated. Up to 40% of its assets may be used to purchase foreign securities. The corporate bond mutual fund returned 12.82% over the last one year period.
Peter Ehret is the fund manager and has managed this corporate bond mutual fund since 2006.
To view the Zacks Rank and past performance of all corporate bond mutual funds, then click here.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds/mutualfund/
