Some of the highest-rated income mutual funds include the Wisdom Tree Dividend Ex-Financials Fund, the Pro Shares S&P 500 Aristocrats ETF and the Schwab U.S .Dividend Equity Fund, reports U.S. News & World Report. Income mutual funds focus primarily on dividend-paying companies that can absorb market volatility.
The Wisdom Tree Fund uses an index that tracks 10 of the highest dividend-yielding companies in specific sectors. Fund managers add or remove companies from the Wisdom Tree Fund based on dividend performances. The Pro Shares S&P 500 tracks companies that reported consistent dividend increases over the past 25 years, and fund managers add or remove companies based on those reports. The Schwab U.S. Dividend Equity Fund invests in companies that are part of the Dow Jones U.S. Dividend 100 Index, according to U.S. News & World Report.