BNY Mellon US Equity Income U1 Acc
Why is this fund on our radar?
BNY Mellon US Equity Income targets a dividend yield of at least 50% higher than the S&P 500 Index, aiming to deliver both attractive income today and sustainable dividend growth over time. Lead manager John Bailer, at the helm since launch in 2018, runs a concentrated portfolio of 30–60 large-cap US stocks, applying an income approach that has been successfully employed across the wider firm since 2011.
Although its performance is measured against the S&P 500 Index to align with its yield target, stock selection begins with a broad screen of companies in the Russell 1000 Index, a good representation of the large-cap US market. John’s approach is firmly value-oriented, targeting companies that are attractively priced, whilst also ensuring each one is of high-quality, supported by good earnings potential or being in a strong financial position. This means looking for businesses with healthy balance sheets, strong cash flow, dividends that are comfortably supported by earnings, and clear reasons for improvement. Together, this approach helps him avoid companies that look cheap but carry hidden risks.
The fund has made it onto our list for consistently adding value through stock selection, and importantly, delivering strong performance without taking excessive risks, protecting capital better during more difficult market conditions. Moreover, what makes it particularly different in the US equity space is its focus on attractively valued, good-quality companies outside the usual tech giants. For investors wanting US exposure without being overly reliant on expensive growth stocks, or seeking a smoother, more dependable return profile, this fund offers a genuinely differentiated option.
Performance
BNY Mellon US Equity Income has demonstrated a strong risk-adjusted performance profile. Over the past five-years to 31/10/2025, the fund has delivered a total return of 126.2%, outpacing both the S&P 500 Index’s return, represented in this case by an ETF in the chart below, of 116.8% and the IA North America sector’s 91.6%. Crucially, it has generated these returns without taking too much undue risk. For example, it has delivered stronger risk-adjusted returns than the S&P 500, meaning investors have been better rewarded for the level of risk taken, whilst maintaining lower volatility, experiencing smaller ups and downs, measured by a standard deviation of 12.4% compared to the benchmark’s 13.0%.
five-year performance
Source: Morningstar
Past performance is not a reliable indicator of future results
The fund’s focus on high-quality value stocks tends to perform well when value equities are in favour, such as during periods of inflation and rising interest rates, exemplified by the strong relative performance in 2022. Value stocks typically feature nearer-term earnings, less speculative growth and a higher dividend yield, providing resilience amid market volatility.
However, in the past 12 months, the fund has returned 8.8%, trailing the S&P 500’s 18.4%, largely due to its limited exposure to mega-cap tech growth stocks, which rebounded sharply following President Trump’s Liberation Day crash. Whilst its value bias and limited exposure to US tech can mean periods of underperformance when markets are dominated by such stocks, we think US growth and broader equity indices remain heavily concentrated in mega-cap ‘Magnificent Seven’ tech stocks, a group of companies that has faced both volatility and valuation concerns this year. Against this backdrop, a value-focussed US equity income strategy like BNY Mellon offers meaningful diversification, with its emphasis on high-quality dividend payers providing a compelling alternative to these heavily owned or popular names.
Portfolio
The fund’s value tilt stems naturally from its income-focussed strategy. John and his team target companies that can deliver both an attractive income today and dividend growth in the future, beginning with a screening of the Russell 1000, a good representation of the large-cap US market. Valuation discipline is central, favouring companies that are attractively priced relative to future earnings and have clear potential to grow in value. But the process isn’t just simply about buying cheap stocks. They seek high quality, attractively valued businesses with strong balance sheets, consistent cash generation, a proven dividend track record and attractive revenue and earnings growth. Combined, these traits have underpinned not only a strong return profile, but also an above-market dividend yield of 2.1% which compares favourably with the S&P 500’s 1.2%.
This emphasis is evident in the fund’s current sector positioning. Financials is the largest relative overweight, followed by energy, both areas where the team sees exceptional value coupled with strong company fundamentals. Holdings such as JPMorgan Chase, AT&T and American International Group exemplify the focus on well-capitalised franchises with attractive valuations, poised to benefit from a more favourable market backdrop.
The value bias also results in a substantial underweight to more expensive, growth-oriented sectors such as technology and consumer discretionary, unusual in a US equity fund given the market’s fascination with the ‘Magnificent Seven’. That said, the fund still owns select technology names, with Cisco Systems and L3Harris Technologies among the top ten holdings. Whilst the team sees greater value elsewhere, this underlines their willingness to invest in higher-growth areas when valuations align with their strict income, growth and quality criteria.
Portfolio Breakdown
Source: BNY Mellon
Our Verdict
The US market is dominated by high-growth sectors like technology, which typically offer lower yields. For investors seeking a differentiated route into US equities, we think BNY Mellon US Equity Income stands out. The fund applies a disciplined, value-focussed approach, targeting large-cap companies with attractive valuations and sustainable dividends, resulting in a portfolio that looks and behaves markedly differently from most peers and the S&P 500. It deliberately tilts toward sectors such as financials and energy, whilst underweighting expensive, low-yielding areas like technology. This means the fund is less reliant on mega-cap growth for returns, more diversified across sectors and well positioned to benefit when value investing is in favour.
This positioning provides genuine diversification for growth-heavy portfolios and may prove advantageous in environments where value or cyclically sensitive stocks outperform. Conversely, it may lag in markets led by richly valued growth sectors. Notably, at the time of writing, its dividend yield of 2.1% compares favourably with the S&P 500’s 1.3%, offering income investors, who might traditionally look to the UK or Europe for higher dividend yields, a compelling way to access US growth without sacrificing their income preference. The result is a balanced, income-oriented strategy suited to both income and total-return objectives.
Key Risks
- Charges are taken from capital, which can increase the yield but reduces the potential for capital growth
- Its value focus and underweight to US tech means the fund will likely lag growth-led market rallies
- Geopolitical headwinds, tariffs and trade tensions could negatively impact the US economy
