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Equity Income Fund (Class Y)  (PEIYX)

Seeking to harness the power of stock dividends since 1977

Equity Income Fund received an  Overall Morningstar Rating  of  

A multidimensional approach to value investing

Darren A. Jaroch, CFA, Portfolio Manager


"I've always been patient and disciplined. And I think those traits have served me well as an investor."

Darren A. Jaroch, CFA, has been a member of Putnam's U.S. and international value equity teams since 1999. He has been instrumental in developing strategic risk controls for Putnam's value investment process.

Watch video Read the brochure (PDF)

Highlights

Objective

The fund seeks capital growth and current income.

Strategy and process

  • A large-value focus: The fund focuses on large companies whose stocks are priced below their long-term potential, and where there may be a catalyst for positive change.
  • Dividend growth: The fund places a distinct emphasis on companies that can grow their dividends and are able and willing to return cash to shareholders.
  • A disciplined process: The portfolio managers invest using fundamental research and quantitative tools supported by strong risk controls in portfolio construction.

Fund price

Yesterday’s close 52-week high 52-week low
Net asset value $24.35
0.45% | $0.11
$26.36
09/21/18
$23.46
04/02/18
Historical fund price

Consistency of positive performance over five years

Performance represents 5-year returns in rolling quarter-end periods since inception.

Performance shown does not reflect the effects of any sales charges. Note that returns of 0.00% are counted as positive periods. For complete fund performance, please click on the performance tab.

21.69%

Best 5-year annualized return

(for period ending 06/30/99)


-2.12%

Worst 5-year annualized return

(for period ending 03/31/09)


10.60%

Average 5-year annualized return


Fund facts as of 10/31/18

Total net assets
$12,263.60M
Turnover (fiscal year end)
11%
Dividend frequency (view rate)
Quarterly
Number of holdings
109
Fiscal year-end
November
CUSIP / Fund code
746745405 / 1810
Inception date
10/01/98
Category
Value
Open to new investors
Ticker
PEIYX

Management team

Portfolio Manager
Portfolio Manager, Analyst


Manager commentary | Q3 2018

Will the pendulum swing toward value?

Portfolio Manager Darren Jaroch explains how defining value can influence the performance outlook.


Literature

Fund information

Fact Sheet (A share) (PDF)
Fact Sheet (Y share) (PDF)
Fact Sheet (VT share) (PDF)
Brochure (PDF)
Disciplined process — Defining value daily (PDF)
Comparing Putnam's U.S. equity funds (PDF)

Legal documents

Summary Prospectus (PDF)
Statutory Prospectus (PDF)
Statement of Additional Information (SAI) (PDF)
Proxy voting results (Form N-PX) (PDF)

Commentary

Annual Report (PDF)
Semiannual Report (PDF)
Quarterly commentary (PDF)
Equity Outlook (PDF)

October stock market volatility may signal a shift
Recent stock market volatility reflects a process of pricing in the fact that the global growth outlook has diverged.
Value opportunities gain traction in turmoil
Beneath dire headlines about plunging markets, we are seeing value opportunities assert themselves.

Performance

  • Total return (%) as of 09/30/18

  • Annual performance as of 09/30/18

Annualized Total return (%) as of 09/30/18

Annualized performance 1 yr. 3 yrs. 5 yrs. 10 yrs.
Before sales charge 13.64% 14.63% 11.62% 11.44%
After sales charge N/A N/A N/A N/A
Russell 1000 Value Index 9.45% 13.55% 10.72% 9.79%

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. Performance assumes reinvestment of distributions and does not account for taxes. Returns before sales charge do not reflect the current maximum sales charges as indicated below. Had the sales charge been reflected, returns would be lower. Returns at public offering price (after sales charge) for class A and class M shares reflect the current maximum initial sales charges of 5.75% and 3.50% for equity funds and Putnam Multi-Asset Absolute Return Fund, and 4.00% and 3.25% for income funds (2.25% and 0.75% for Putnam Short Duration Bond Fund and 1.00% and 0.75% for Putnam Floating Rate Income Fund, Putnam Fixed Income Absolute Return Fund, and Putnam Short-Term Municipal Income Fund), respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter (except for Putnam Floating Rate Income Fund, Putnam Short Duration Bond Fund, Putnam Fixed Income Absolute Return Fund, and Putnam Short-Term Municipal Income Fund, which is 1% in the first year, declining to 0.5% in the second year, and is eliminated thereafter). Class C shares reflect a 1% CDSC the first year that is eliminated thereafter. Performance for class B, C, M, N, R, T1, and Y shares prior to their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares (with the exception of Putnam Tax-Free High Yield Fund and Putnam AMT-Free Municipal Fund, which are based on the historical performance of class B shares). Returns at public offering price (after sales charge) for class N shares reflect the current maximum initial sales charge of 1.50%. Class R5/R6 shares, available to qualified employee-benefit plans only, are sold without an initial sales charge and have no CDSC. Class Y shares are generally only available for corporate and institutional clients and have no initial sales charge. Performance for Class R5/R6 shares before their inception are derived from the historical performance of class Y shares, which have not been adjusted for the lower expenses; had they, returns would have been higher. Class A, M, and T1 shares of Putnam money market funds have no initial sales charge. For a portion of the period, some funds had expenses limitations or had been sold on a limited basis with limited assets and expenses, without which returns would be lower.

Performance snapshot

  Before sales charge After sales charge
1 mt. as of 10/31/18 -6.29 % -
YTD as of 11/16/18 0.36 % -

Yield

Distribution rate before sales charge
as of 11/16/18
1.56%
Distribution rate after sales charge
as of 11/16/18
1.56%
30-day SEC yield as of 10/31/18 1.62%

Risk-adjusted performance as of 10/31/18

Alpha (3 yrs.) 0.91
Sharpe ratio (3 yrs.) 0.96
Treynor ratio (3 yrs.) 8.98
Information ratio (3 yrs.) 0.38

Volatility as of 10/31/18

Standard deviation (3 yrs.) 9.27%
Beta 0.99
R-squared 0.94

Capture ratio as of 10/31/18

Up-market (3 yrs.) 102.90
Down-market (3 yrs.) 95.92

Lipper rankings as of 10/31/18

Time period Rank/Funds in category Percentile ranking
1 yr. 161/536 30%
3 yrs. 150/459 33%
5 yrs. 69/396 18%
10 yrs. 4/245 2%
Lipper category: Equity Income Funds

Morningstar Ratings as of 10/31/18

Time period Funds in category Morningstar Rating
Overall 1089
3 yrs. 1089
5 yrs. 932
10 yrs. 678
Morningstar category: Large Value

Distributions

Record/Ex dividend date 09/26/18
Payable date 09/28/18
Income $0.095
Extra income --
Short-term cap. gain --
Long-term cap. gain --

Lipper rankings are based on total return without sales charge relative to all share classes of funds with similar objectives as determined by Lipper. Past performance is not indicative of future results.

The Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

The up-market capture ratio is used to evaluate how well an investment manager performed relative to an index during periods when that index has risen. The ratio is calculated by dividing the manager’s returns by the returns of the index during the up-market, and multiplying that factor by 100. The down-market capture ratio is used to evaluate how well an investment manager performed relative to an index during periods when that index has dropped. The ratio is calculated by dividing the manager’s returns by the returns of the index during the down-market and multiplying that factor by 100.


Compare

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** FundVisualizer comparison based on Putnam fund versus the largest fund in its Morningstar category.


Holdings

Top 10 holdings as of 10/31/18

JPMorgan Chase 4.02%
Microsoft Corp 3.55%
Bank Of America Corp 3.19%
Citigroup 2.86%
Walmart 2.39%
Apple 2.39%
Johnson Johnson 2.15%
Exxon Mobil Corp 1.83%
ConocoPhillips 1.80%
Northrop Grumman Corp 1.78%
Top 10 holdings, percent of portfolio 25.96%

Full portfolio holdings as of 09/30/18

JPMORGAN CHASE & CO 3.91%
MICROSOFT CORP 3.57%
BANK OF AMERICA CORP 3.21%
CITIGROUP INC 2.94%
APPLE INC 2.31%
NORTHROP GRUMMAN CORP 2.27%
WALMART INC 2.10%
JOHNSON & JOHNSON 1.99%
CONOCOPHILLIPS 1.87%
EXXON MOBIL CORP 1.83%
BECTON DICKINSON AND CO 1.79%
MARATHON OIL CORP 1.56%
DOWDUPONT INC 1.48%
CIGNA CORP 1.47%
VALERO ENERGY CORP 1.42%
ASSURED GUARANTY LTD 1.36%
RAYTHEON COMPANY 1.34%
AT&T INC 1.32%
MERCK & CO. INC. 1.32%
AMGEN INC 1.31%
UNION PACIFIC CORP 1.30%
DANAHER CORP 1.28%
AMERICAN INTERNATIONAL GROUP 1.20%
BP PLC 1.20%
CISCO SYSTEMS INC 1.20%
KKR & CO INC -A 1.19%
KROGER CO 1.17%
GILEAD SCIENCES INC 1.15%
QUALCOMM INC 1.14%
REGIONS FINANCIAL CORP 1.14%
COMCAST CORP-CLASS A 1.12%
DXC TECHNOLOGY CO 1.12%
ASTRAZENECA PLC-SPONS ADR 1.11%
ELI LILLY & CO 1.09%
AMERICAN TOWER CORP 1.05%
WELLS FARGO & CO 1.05%
TOTAL SA 1.02%
ALCOA CORP 1.00%
RADIAN GROUP INC 0.99%
CHARTER COMMUNICATIONS INC-A 0.98%
PEPSICO INC 0.98%
GOLDMAN SACHS GROUP INC 0.94%
JOHNSON CONTROLS INTERNATION 0.94%
PFIZER INC 0.94%
KIMBERLY-CLARK CORP 0.93%
GAMING AND LEISURE PROPERTIE 0.92%
SOUTHWEST AIRLINES CO 0.91%
STATE STREET CORP 0.91%
ANADARKO PETROLEUM CORP 0.90%
EXELON CORP 0.90%
O'REILLY AUTOMOTIVE INC 0.90%
FIDELITY NATIONAL INFO SERV 0.89%
NRG ENERGY INC 0.87%
HILTON WORLDWIDE HOLDINGS IN 0.84%
HOME DEPOT INC 0.81%
MOLSON COORS BREWING CO -B 0.80%
EDISON INTERNATIONAL 0.78%
APTIV PLC 0.77%
GENERAL MOTORS CO 0.77%
HARTFORD FINANCIAL SVCS GRP 0.73%
INTEL CORP 0.73%
HONEYWELL INTERNATIONAL INC 0.72%
AIR PRODUCTS & CHEMICALS INC 0.71%
CAPITAL ONE FINANCIAL CORP 0.69%
EOG RESOURCES INC 0.69%
BOSTON PROPERTIES INC 0.66%
ENTERPRISE PRODUCTS PARTNERS 0.65%
BALL CORP 0.64%
HALLIBURTON CO 0.61%
KEYCORP 0.61%
KINDER MORGAN INC 0.58%
SUNCOR ENERGY INC 0.58%
AMERICAN ELECTRIC POWER 0.56%
TEXAS INSTRUMENTS INC 0.56%
VERIZON COMMUNICATIONS INC 0.53%
EMERSON ELECTRIC CO 0.51%
KRAFT HEINZ CO/THE 0.51%
SCHWAB (CHARLES) CORP 0.50%
NEXTERA ENERGY INC 0.46%
WALGREENS BOOTS ALLIANCE INC 0.46%
P G & E CORP 0.44%
MANDATORY EXCH TRUST P/P 144A 05.7500 CV PFD 0.43%
PULTEGROUP INC 0.40%
NXP SEMICONDUCTORS NV 0.39%
BJ'S WHOLESALE CLUB HOLDINGS 0.37%
MFA FINANCIAL INC 0.29%
ON SEMICONDUCTOR CORP 0.27%
COTY INC-CL A 0.25%
GENERAL ELECTRIC CO 0.25%
INVESCO LTD 0.24%
KEURIG DR PEPPER INC 0.20%
DELPHI TECHNOLOGIES PLC 0.09%
OPORTUN FIN CORP P/P SERIES H PFD 0.05%
OPORTUN FIN CORP P/P 0.02%
OPORTUN FIN G-1 PFD CV P/P 0.02%
OPORTUN FIN F-1 PFD CV P/P 0.01%
CAD/USD 10/17/2018 CITI 0.00%
CAD/USD 10/17/2018 GSFX 0.00%
EUR/USD 12/19/2018 BANKAM 0.00%
EUR/USD 12/19/2018 GSFX 0.00%
EUR/USD 12/19/2018 SSBT 0.00%
GBP/USD 12/19/2018 BCAP-FX 0.00%
GBP/USD 12/19/2018 GSFX 0.00%
GLOBAL FASHION GRP 0.00%
GLOBAL FASHION GRP P/P 0.00%
HC BRILLANT SERVICES GMBH P/P 0.00%
NEW BIGFOOT OTHER ASSETS GMBH P/P 0.00%
NEW MIDDLE EAST OTHER ASSETS GMBH P/P 0.00%
OPORTUN FIN A-1 PFD CV P/P 0.00%
OPORTUN FIN B-1 PFD CV P/P 0.00%
OPORTUN FIN C-1 PFD CV P/P 0.00%
OPORTUN FIN D-1 PFD CV P/P 0.00%
OPORTUN FIN E-1 PFD CV P/P 0.00%
OPORTUN FIN F PFD CV P/P 0.00%

Prior top 10 holdings

Top 10 holdings as of 10/31/18
JPMorgan Chase
Microsoft Corp
Bank Of America Corp
Citigroup
Walmart
Apple
Johnson Johnson
Exxon Mobil Corp
ConocoPhillips
Northrop Grumman Corp
Holdings represent 25.96% of portfolio
Top 10 holdings as of 09/30/18
JPMorgan Chase
Microsoft Corp
Bank Of America Corp
Citigroup
Apple
Northrop Grumman Corp
Walmart
Johnson Johnson
ConocoPhillips
Exxon Mobil Corp
Holdings represent 26.00% of portfolio
Top 10 holdings as of 08/31/18
JPMorgan Chase
Microsoft Corp
Bank Of America Corp
Citigroup
Apple
Walmart
Northrop Grumman Corp
Johnson & Johnson
BD Medical
ConocoPhillips
Holdings represent 26.01% of portfolio
Top 10 holdings as of 07/31/18
JPMorgan Chase
Microsoft Corp
Bank of America
Citigroup
Northrop Grumman Corp
Walmart
Apple
Johnson & Johnson
ConocoPhillips
Exxon Mobil Corp
Holdings represent 26.15% of portfolio

Portfolio composition as of 10/31/18

Common stock 95.83%
Cash and net other assets 3.66%
Convertible preferred stock 0.51%

Equity statistics as of 10/31/18

Median market cap $36.17B
Weighted average market cap $165.68B
Price to book 2.09
Price to earnings 12.95

Fund characteristics will vary over time.

Due to rounding, percentages may not equal 100%.

Consider these risks before investing: Value stocks may fail to rebound, and the market may not favor value-style investing. Income provided by the fund may be reduced by changes in the dividend policies of, and the capital resources available at, the companies in which the fund invests. Stock values may fall or fail to rise over time for several reasons, including general financial market conditions, changing market perceptions, changes in government intervention in the financial markets, and factors related to a specific issuer, industry or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. You can lose money by investing in the fund.

Top industry sectors as of 10/31/18

Financials 21.55%
Health care 13.83%
Information technology 12.35%
Energy 12.10%
Consumer staples 8.63%
Industrials 7.74%
Utilities 4.84%
Consumer discretionary 4.49%
Communication services 4.19%
 
Other
10.28%
Materials 3.80%
Cash and net other assets 3.66%
Real estate 2.82%

The unclassified sector (where applicable) includes exchange traded funds and other securities not able to be classified by sector.

Sectors will vary over time.


Expenses

Expense ratio

Class A Class B Class C Class M Class R Class R5 Class R6 Class Y
Total expense ratio 0.91% 1.66% 1.66% 1.41% 1.16% 0.65% 0.55% 0.66%
What you pay 0.91% 1.66% 1.66% 1.41% 1.16% 0.65% 0.55% 0.66%

Sales charge

 Breakpoint Class A Class B Class C Class M Class R Class R5 Class R6 Class Y
$0-$49,999 5.75% / 5.00% 0.00% / 4.00% 0.00% / 1.00% 3.50% / 3.00% -- -- -- --
$50,000-$99,999 4.50% / 3.75% 0.00% / 4.00% 0.00% / 1.00% 2.50% / 2.00% -- -- -- --
$100,000-$249,999 3.50% / 2.75% -- 0.00% / 1.00% 1.50% / 1.00% -- -- -- --
$250,000-$499,999 2.50% / 2.00% -- 0.00% / 1.00% 1.00% / 1.00% -- -- -- --
$500,000-$999,999 2.00% / 1.75% -- 0.00% / 1.00% 1.00% / 1.00% -- -- -- --
$1M-$4M 0.00% / 1.00% -- -- -- -- -- -- --
$4M-$50M 0.00% / 0.50% -- -- -- -- -- -- --
$50M+ 0.00% / 0.25% -- -- -- -- -- -- --

CDSC

  Class A (sales for $1,000,000+) Class B Class C Class M Class R Class R5 Class R6 Class Y
0 to 9 mts. 1.00% 5.00% 1.00% -- -- -- -- --
9 to 12 mts. 1.00% 5.00% 1.00% -- -- -- -- --
2 yrs. 0.00% 4.00% 0.00% -- -- -- -- --
3 yrs. 0.00% 3.00% 0.00% -- -- -- -- --
4 yrs. 0.00% 3.00% 0.00% -- -- -- -- --
5 yrs. 0.00% 2.00% 0.00% -- -- -- -- --
6 yrs. 0.00% 1.00% 0.00% -- -- -- -- --
7+ yrs. 0.00% 0.00% 0.00% -- -- -- -- --

Trail commissions

  Class A Class B Class C Class M Class R Class R5 Class R6 Class Y
  0.25% 0.25% 1.00% 0.65% 0.50% 0.00% 0.00% 0.00%
  NA NA NA NA NA NA NA NA
  NA NA NA NA NA NA NA NA

For sales and trail commission information on purchases over $1 million and participant-directed qualified retirement plans, see a Putnam fund prospectus and the statement of additional information.

The Russell 1000 Value Index is an unmanaged index of those companies in the large-cap Russell 1000 Index chosen for their value orientation. You cannot invest directly in an index.

Consider these risks before investing: Value stocks may fail to rebound, and the market may not favor value-style investing. Income provided by the fund may be reduced by changes in the dividend policies of, and the capital resources available at, the companies in which the fund invests. Stock values may fall or fail to rise over time for several reasons, including general financial market conditions, changing market perceptions, changes in government intervention in the financial markets, and factors related to a specific issuer, industry or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. You can lose money by investing in the fund.