Who Should Invest in Dividend Yield Funds?
- Dividend Yield Funds are good for investors who want a regular income in the form of dividends since the mutual funds pass on the dividends from the companies to the investors. Although Dividend Yield Funds can invest across market capitalisation and sectors, most of these funds invest at least 50% of their assets in large cap companies that are mature and have a healthy cash flow in order to pay dividends.
Features of Dividend Yield Funds
- These funds are benchmarked against the Nifty Dividend Opportunities 50 Index, so high dividend yielding stocks are selected by the fund house after looking at this index.
Taxability of Dividend Yield Funds
- Low-interest rates make high Dividend Yield Funds attractive for investors who want higher tax-efficient gains. Such investors shift their investment from dividend paying stocks to Dividend Yield Funds to avoid a steep tax on dividends. This is because investors are taxed less when they buy the funds as compared to when they invest in equities with the dividend payout option.
Risk Involved with Dividend Yield Funds
- It is best to invest in Dividend Yield Funds with a reasonable size corpus. You should avoid funds with a small size corpus since the right investment strategy can make these funds look appealing as compared to other funds, but small mistakes on the part of the fund managers can make plunge the funds to the bottom.
Advantages of Dividend Yield Mutual Funds
- Dividend Yield Funds invest mainly in dividend yielding stocks that have a consistent record of paying timely dividends. The fund house passes on these dividends to the investors. Hence, these funds are perfect for investors who want a regular income in the form of dividends.
Popular Dividend Yield Funds
- Fund Name
- Min SIP Investment Amt
- AUM (Cr.)
- 3Y Return
Templeton India Equity Income Fund – Direct Growth is an Dividend Yield scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Anand Radhakrishnan. With an impressive AUM of ₹1,565 Crores, this scheme's latest NAV is ₹107.1191 as of 27-09-23.
Templeton India Equity Income Fund – Direct Growth scheme has delivered a return performance of 24% in the last 1 year, 31.3% in the last 3 years, and an 15.2% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Dividend Yield funds.
- Min SIP Investment Amt
- ₹5,000
- AUM (Cr.)
- ₹1,565
- 3Y Return
- 24%
ICICI Pru Dividend Yield Equity Fund – Direct Growth is an Dividend Yield scheme that was launched on 16-05-14 and is currently under the management of our experienced fund manager Mittul Kalawadia. With an impressive AUM of ₹2,216 Crores, this scheme's latest NAV is ₹38.37 as of 27-09-23.
ICICI Pru Dividend Yield Equity Fund – Direct Growth scheme has delivered a return performance of 31.1% in the last 1 year, 35.3% in the last 3 years, and an 15.4% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Dividend Yield funds.
- Min SIP Investment Amt
- ₹5,000
- AUM (Cr.)
- ₹2,216
- 3Y Return
- 31.1%
LIC MF Dividend Yield Fund – Direct Growth is an Dividend Yield scheme that was launched on 21-12-18 and is currently under the management of our experienced fund manager Alok Ranjan. With an impressive AUM of ₹89 Crores, this scheme's latest NAV is ₹21.4016 as of 27-09-23.
LIC MF Dividend Yield Fund – Direct Growth scheme has delivered a return performance of 21% in the last 1 year, 23% in the last 3 years, and an 17.2% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Dividend Yield funds.
- Min SIP Investment Amt
- ₹5,000
- AUM (Cr.)
- ₹89
- 3Y Return
- 21%
Sundaram Dividend Yield Fund – Direct Growth is an Dividend Yield scheme that was launched on 02-01-13 and is currently under the management of our experienced fund manager Ratish Varier. With an impressive AUM of ₹567 Crores, this scheme's latest NAV is ₹108.2815 as of 27-09-23.
Sundaram Dividend Yield Fund – Direct Growth scheme has delivered a return performance of 22.4% in the last 1 year, 24.4% in the last 3 years, and an 13.9% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Dividend Yield funds.
- Min SIP Investment Amt
- ₹5,000
- AUM (Cr.)
- ₹567
- 3Y Return
- 22.4%
Aditya Birla SL Dividend Yield Fund – Direct Growth is an Dividend Yield scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Dhaval Gala. With an impressive AUM of ₹992 Crores, this scheme's latest NAV is ₹352.71 as of 27-09-23.
Aditya Birla SL Dividend Yield Fund – Direct Growth scheme has delivered a return performance of 32.5% in the last 1 year, 28% in the last 3 years, and an 12.9% since its launch. With a minimum SIP investment of just ₹1,000, this scheme offers a great investment opportunity for those looking to invest in Dividend Yield funds.
- Min SIP Investment Amt
- ₹1,000
- AUM (Cr.)
- ₹992
- 3Y Return
- 32.5%
UTI-Dividend Yield Fund – Direct Growth is an Dividend Yield scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Swati Kulkarni. With an impressive AUM of ₹3,108 Crores, this scheme's latest NAV is ₹131.8385 as of 27-09-23.
UTI-Dividend Yield Fund – Direct Growth scheme has delivered a return performance of 24.8% in the last 1 year, 24.4% in the last 3 years, and an 13.2% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Dividend Yield funds.
- Min SIP Investment Amt
- ₹5,000
- AUM (Cr.)
- ₹3,108
- 3Y Return
- 24.8%
Tata Dividend Yield Fund – Direct Growth is an Dividend Yield scheme that was launched on 20-05-21 and is currently under the management of our experienced fund manager Sailesh Jain. With an impressive AUM of ₹578 Crores, this scheme's latest NAV is ₹14.3606 as of 27-09-23.
Tata Dividend Yield Fund – Direct Growth scheme has delivered a return performance of 28.9% in the last 1 year, -% in the last 3 years, and an 16.3% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Dividend Yield funds.
- Min SIP Investment Amt
- ₹5,000
- AUM (Cr.)
- ₹578
- 3Y Return
- 28.9%
HDFC Dividend Yield Fund – Direct Growth is an Dividend Yield scheme that was launched on 18-12-20 and is currently under the management of our experienced fund manager Gopal Agrawal. With an impressive AUM of ₹3,601 Crores, this scheme's latest NAV is ₹19.432 as of 27-09-23.
HDFC Dividend Yield Fund – Direct Growth scheme has delivered a return performance of 29.3% in the last 1 year, -% in the last 3 years, and an 26.8% since its launch. With a minimum SIP investment of just ₹100, this scheme offers a great investment opportunity for those looking to invest in Dividend Yield funds.
- Min SIP Investment Amt
- ₹100
- AUM (Cr.)
- ₹3,601
- 3Y Return
- 29.3%
Frequently Asked Questions
How do fund houses select ‘High Dividend’ companies?
Most fund houses select ‘High Dividend’ companies by comparing their dividends yield with a benchmark index like Sensex or Nifty 50. For example: If the dividend yield of Nifty 50 currently is near 1.25, a fund house would prefer investing in companies having a dividend yield higher than 1.25.
Is it a good idea to invest in Dividend Yield funds?
Dividend yield funds are generally stable and are a good investment for those looking for low volatile stocks. These funds are not recommended for aggressive growth-seekers, but they prove to be a good addition to most investment portfolios.
Generally, a mutual fund share price falls soon after paying a dividend; why so?
Mutual fund share prices fall after paying dividends because the money paid as dividends is extracted from the existing assets of the fund.
Do dividend yield funds invest only in ‘High Dividend' companies?
Most dividend yield funds invest about 75%-80% of their capital in high dividend-paying companies. The remaining corpus is invested in companies’ stocks with high returns potential in the future.
The trick here is to invest in companies with low dividend yields or no-dividend pay that would provide good returns if they are undervalued, provided their fundamentals are strong.
What is considered to be a good dividend yield?
A reasonable dividend yield depends on the market conditions, but an average yield between 2% to 6% is considered ideal.
Who are these funds suited for?
Dividend Yield funds focus on the dividend yield of stocks. They are appropriate for investors who are looking to invest in equity funds but with a low level of volatility in their investments. These funds are invested in companies that are generally stable and hence are best suited for the following groups of investors/individuals:
- Low-risk appetite- Investors who do not prefer to take high risks and prefer to let go of better profits without exposing themselves to market risks.
- Diversified portfolio- Those willing to have an all-around investment and assess risk on a large scale should invest in Dividend Yielding funds, thereby assisting the investor in having a diversified portfolio.
- First-time investors- These funds provide minimal risk-investment routes for limited periods and are best for those investing for the first time in mutual funds.
- Short-investment horizon- These funds generate high returns even in short time frames; hence it is a good investment for those who do not want to wait for long spells to gain returns from their investments.
- Regular income- Investors who are hoping for a regular income from their investments, even though a low one, should consider investing in these funds.