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10 Best Equity-Income Funds for 2012

NEW YORK (TheStreet Ratings) -- TheStreet Ratings reviews the risk-adjusted return performance of around 25,000 funds every month. The best rated equity-income exchange-traded funds for 2012 are listed each month at TheStreet's Top-Rated ETFs page.

When expanding the selection range beyond just exchange-traded funds to also include open-end and traditional closed-end funds, 10 funds stand out as the best. The funds below are worthy of consideration for your 2012 portfolio.

To be considered an equity-income fund, the fund must seek current income by investing a minimum of 65% of its assets in income producing equity securities. Our listing of the top funds in this category is led by three open-end funds and seven traditional closed-end funds.

Here are the 10 best equity-income funds for 2012:

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10. John Hancock Preferred Income Fund

John Hancock Preferred Income Fund (HPI) has a primary objective to provide a high level of current income consistent with preservation of capital. Its secondary objective is to provide growth of capital. The fund seeks to achieve its objectives by investing in a diversified portfolio of securities that in the opinion of the advisor may be undervalued relative to similar securities in the marketplace. The fund invests at least 80% of its assets in preferred stocks and other preferred securities including convertible preferred securities. This is a traditional closed-end fund.

Expense Ratio: 1.74%

Front Load: 0.00%

Back Load: 0.00%

Rated "B+" by TheStreet Ratings:

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9. John Hancock Preferred Income Fund II

John Hancock Preferred Income Fund II (HPF) is a closed-end non-diversified management investment company. The fund's primary investment objective is to provide a high level of current income consistent with preservation of capital. The fund's secondary investment objective is to provide growth of capital. Under normal market conditions the fund invests at least 80% of its assets in preferred stocks and other preferred securities including convertible preferred securities 25% or more of its total assets in the industries comprising the utilities sector and at least 80% of its total assets in preferred securities or other fixed income securities which are rated investment grade or higher at the time of investment.

Expense Ratio: 1.72%

Front Load: 0.00%

Back Load: 0.00%

Rated "B+" by TheStreet Ratings:

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8. Nicholas Equity Income

Nicholas Equity Income (NSEIX) seeks to produce reasonable income and moderate long term growth. To achieve reasonable income, the fund seeks an income yield that exceeds the corporate dividend yield on the securities included in the S&P 500 Composite Index. The fund invest in a diversified portfolio of income producing equity securities and corporate and government fixed income investments. The fund invests at least 80 percent of its net assets in equity securities. The fund may invest in both investment grade and non-investment grade securities and its investment may include both rated and unrated securities.

Expense Ratio: 0.99%

Front Load: 0.00%

Back Load: 0.00%

Rated "B+" by TheStreet Ratings:

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7. Neuberger Berman Equity Income Fund A

Neuberger Berman Equity Income Fund A (NBHAX) seeks total return emphasizing both current income and capital appreciation. To pursue this goal, the fund invests mainly in income-oriented equity securities that pay dividends, which may include real estate investment trusts, convertible securities, Canadian income trusts and common stocks. The fund invests primarily in domestic stocks and it may also invest in stocks of foreign companies. The fund may invest in companies of any market capitalization. The fund typically employs a value approach in selecting investments.

Expense Ratio: 1.37%

Front Load: 5.75%

Back Load: 0.00%

Rated "A-" by TheStreet Ratings:

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6. Flaherty & Crumrine/Claymore Preferred Securities Income Fund Inc

Flaherty & Crumrine/Claymore Preferred Securities Income Fund Inc (FFC) has an investment objective of high current income consistent with the preservation of capital. The fund will normally invest at least 80% if its total assets in a diversified portfolio of preferred securities. Under current market conditions, the fund expects that its portfolio of preferred securities will consist principally of "hybrid" or taxable preferreds. This is a traditional closed-end fund.

Expense Ratio: 1.73%

Front Load: 0.00%

Back Load: 0.00%

Rated "A" by TheStreet Ratings:

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5. John Hancock Premium Dividend

John Hancock Premium Dividend (PDT) seeks to provide a high level of current income consistent with modest growth of capital for holders of its common shares. The fund seeks to invest in a diversified portfolio of dividend-paying preferred stocks and common equity securities. Under normal circumstances the fund invests at least 80% of its net assets in dividend-paying securities. The fund will normally invest more than 65% of its total assets in securities of companies in the utilities industry. Preferred stocks and debt obligations in which the fund invests are rated investment grade at the time of investment or will be preferred stock of issuers of investment grade senior debt. This is a traditional closed-end fund.

Expense Ratio: 2.26%

Front Load: 0.00%

Back Load: 0.00%

Rated "A" by TheStreet Ratings:

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4. Flaherty & Crumrine Preferred Income Fund Inc

Flaherty & Crumrine Preferred Income Fund Inc (PFD) is a diversified, closed-end management investment company. The investment objective is high current income for holders of its common stock consistent with preservation of capital. The fund will invest substantially all of its assets in preferred stocks. Preferred stocks that the fund will acquire will be rated investment grade, although the fund is permitted to invest up to 15% of the portfolio in preferred stocks rated less than investment grade. The fund invests 25% or more of its assets in the utilities industry and another 25% in the banking industry. The fund has leveraged itself through the issuance of preferred stock.

Expense Ratio: 2.29%

Front Load: 0.00%

Back Load: 0.00%

Rated "A" by TheStreet Ratings:

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3. Flaherty & Crumrine/Claymore Total Return Fund

Flaherty & Crumrine/Claymore Total Return Fund (FLC) has a primary investment objective to seek high current income for holders of this traditional closed-end fund. The fund's secondary investment objective is capital appreciation. At least 80% of the fund's total assets will be invested in a diversified portfolio of preferred securities and other income-producing securities consisting of various debt securities. At least 80% of the Fund's holdings of preferred and debt securities will be investment grade quality at the time of purchase.

Expense Ratio: 2.08%

Front Load: 0.00%

Back Load: 0.00%

Rated "A" by TheStreet Ratings:

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2. Prudential Jennison Equity Income A

Prudential Jennison Equity Income A (SPQAX) seeks income and capital appreciation by investing at least 65 percent of its total assets in income-producing equity and equity-related securities. The fund will seek companies with the ability to sustain and grow their dividends.

Expense Ratio: 1.71%

Front Load: 5.50%

Back Load: 0.00%

Rated "A+" by TheStreet Ratings:

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1. Flaherty & Crumrine Preferred Income Opportunity Fund

Flaherty & Crumrine Preferred Income Opportunity Fund (PFO) is a diversified, closed-end management investment company. The fund's investment objective is high current income for shareholders consistent with preservation of capital. The fund will invest at least 80%, but not less than 65%, of its assets in a diversified portfolio of preferred stocks consisting of adjustable rate preferred stocks and fixed rate preferred stocks, some of which are expected to be hedged. Preferred stocks in which the fund will invest will be rated investment grade. The fund will concentrate its investments in the utilities industry. The fund has leveraged itself through the issuance of preferred stock.

Expense Ratio: 2.32%

Front Load: 0.00%

Back Load: 0.00%

Rated "A+" by TheStreet Ratings:

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If you decide that any of closed-end funds included above are a good fit for your 2012 portfolio, be mindful of the premium or discount embedded in the market price when timing your purchase.

How We Rate Funds

TheStreet Ratings condenses the available fund performance and risk data, including penalties for load charges, into a single composite opinion of each fund's risk-adjusted performance. This allows the unbiased identification of those funds that have historically done well and those that have underperformed the market. While there is no guarantee of future performance, these investment ratings provide a solid framework for making informed, timely investment decisions. In order to qualify for a rating, an open-end fund must either have three years of risk and return data or be an additional share class of an existing fund with at least three years of performance statistics.

Funds rated "A" or "B" are considered "Buy" based on a track record of higher than average risk-adjusted performance. Funds at the "C" level are rated as "Hold," while underperformers at the "D" and "E" levels our model ranks as "Sell."

-- -- Written by Kevin Baker in Jupiter, Fla.

MORE FROM THESTREET RATINGS:




Kevin Baker became the senior financial analyst for TheStreet Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering equity and mutual fund ratings. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.

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