American Funds Capital Income Builder Fund

Scorecard
3 / 5 Stars
Lipper
2 2 3 5 1
Zacks Investment Research
1 (Strong Buy)
Standard & Poor's
3 / 5 Stars
TheStreet.com
C (Hold)

U.S. News evaluated 121 World Allocation Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

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Note: Profile written for different share class.

Performance

The fund has returned 10.30 percent over the past year, 8.44 percent over the past three years, 13.19 percent over the past five years, and 6.38 percent over the past decade.

Trailing Returns Updated 03.31.2014
Year to date 1.7%
1 Year 10.3%
3 Years (Annualized) 8.4%
5 Years (Annualized) 13.2%
10 Years (Annualized) 6.4%

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Summary

Rare is the investor who will complain about receiving regular payments from a mutual fund. By that metric, the world-allocation fund American Funds Capital Income Builder has a long track record of solid performance. However, according to Morningstar analyst Kevin McDevitt, the fund's emphasis on high-yield stocks has caused it to lag behind it's category recently, landing the fund in the category's bottom third for three-year returns.

As of April 22, 2014, the fund has assets totaling $91.28 billion. Its portfolio consists primarily of dividend-paying stocks and bonds from the United States and abroad.

The fund counts on large, established blue chips like AT&T and Philip Morris to anchor its growth. It couples its stock exposure with a tame approach to bonds. Of its total assets, the fund tends to allocate at least 90 percent to income-producing securities. The fund has proved adept at producing better dividend yields than the competition, and with the economy potentially headed for a sustained period of slow growth, this ability could make it particularly valuable in 2011 and beyond. Even so, the fund has failed to beat its category average in recent years. The fund has returned 10.30 percent over the past year and 8.44 percent over the past three years.

Historically, Capital Income Builder has gotten high marks for its steady returns. Although damaging in 2008, its international exposure has boosted its returns in past years. Abroad, the fund invests heavily in Europe, where companies are more likely to pay dividends. Equities have generally accounted for roughly 50 percent to 70 percent of the fund's portfolio, and its managers have traditionally favored established players with brand names. The fund has returned 13.19 percent over the past five years and 6.38 percent over the past decade.

Investment Strategy

Capital Income Builder seeks to provide a growing dividend—with higher distributions every quarter, if possible—together with a current yield that exceeds that paid by U.S. stocks overall. "We consider a fund like this to be an equity-income fund, albeit one that has a good portion in fixed-income," says Dale Hanks, vice president with Capital Research and Management.

Role in Portfolio

Morningstar calls this fund a "core" investment. 

Management

The fund takes a team-based approach to management and relies on a group of investment veterans. 

Fees

The fund's expense ratio is 1.37 percent. 

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Risk

This fund's bond holdings and its preference for blue chips help minimize risk.

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Fund Opinions

The fund's Value Line Overall Rank, a measure of risk-adjusted performance and relative growth in fund returns, is 3 on a scale of 1 to 5, with 1 being the best and 5 the worst.

Value Line 2014-04-10

The fund's Value Line Growth Persistence rank, which awards funds that consistently outperform their broad universes, is 4 for one year, 3 for five years, and 3 for 10 years. Scores are on a 1 to 5 scale, with 1 being the best and 5 the worst.

Value Line 2014-04-10

The fund's Value Line Risk Rank, a measure of volatility, is 2 on a scale of 1 to 5, with 1 being the least volatile and 5 the most.

Value Line 2014-04-10

In the January 2010 edition of Morningstar's Fund Family Reports, John Coumarianos says, "This fund usually keeps a 60/40 stock/bond portfolio and views the world as its oyster. It’s a great one-fund solution for an investor’s allocation, provided the split between stocks and bonds is appropriate."

Morningstar 2010-06-02

In the annual Lipper/Barron's Fund Families Survey of 2010, American Funds ranks 49th out of 57 fund families surveyed.

Lipper

Morningstar gives this fund a stewardship rating of A on a scale of A to F, saying "This fund is supported by a shareholder-focused corporate culture and a fund board led by an independent chairman. Its fees also are reasonable. Overall, it's a strong steward of capital."

Morningstar 2011-04-01

In the January 2010 edition of Morningstar's Fund Family Reports, John Coumarianos says, "This fund usually keeps a 60/40 stock/bond portfolio and views the world as its oyster. It’s a great one-fund solution for an investor’s allocation, provided the split between stocks and bonds is appropriate."

Morningstar 2010-06-02

In the annual Lipper/Barron's Fund Families Survey of 2010, American Funds ranks 49th out of 57 fund families surveyed.

Lipper

Morningstar gives this fund a stewardship rating of A on a scale of A to F, saying "This fund is supported by a shareholder-focused corporate culture and a fund board led by an independent chairman. Its fees also are reasonable. Overall, it's a strong steward of capital."

Morningstar 2011-04-01