Here’s what India’s best-performing dividend yield mutual fund has bet on

Mutual Funds
by 5paisa Research Team Last Updated: 2022-07-07T12:19:01+05:30

The stock market is a volatile space and to beat the ups and downs one conservative investment strategy is to bet on high dividend-yielding stocks. However, betting on a single dividend yield stock could yet be risky as the price may sink due to various reasons.

One way to play the dividend yield game is to look for mutual funds that replicate the same strategy with a clutch of high dividend-paying companies.

While investing in dividend yield mutual funds does not guarantee a return, let alone high returns in a falling market, but they do offer a better chance of making money.

If we look at the set of eight dividend yield theme mutual funds, half of them have sported a negative return of 0-3% over the last one year, almost in line with the broader markets.

But three have actually churned out a reasonable return of over 8% each.

The best performing mutual fund in the group is ICICI Prudential Dividend Yield Equity Fund – (Direct), which has generated double-digit returns for its unit holders. In fact, barring a five-year period where it just fell short of the 10% mark, it has churned out annual returns in double digits over the long term.

So, what did it bet on and what was it up to recently?

The mutual fund scheme has a basket of 39 stocks with the top ten companies accounting for a little over half of the corpus. It has a low portfolio P/E ratio of 14.48 and is overweight on giant companies, compared with the peer group that also has a relatively higher mid-cap exposure.

Sectorally, it is overweight on technology, financials, automobile, services, construction, insurance, healthcare and communications, compared to the peer group.

At the same time, it is underweight on energy, metals and mining, consumer staples, capital goods and chemicals compared to other funds in the same theme.

Within its top picks, it increased its stake in companies like Infosys, HCL Tech, ONGC, Axis Bank, Tech Mahindra, NTPC and HDFC Bank. It also raised its exposure to Sundaram Finance, Coal India, Maruti Suzuki, Hindalco, Zensar and Gujarat Pipavav in the month of May 2022.

In the same period, it pushed its exposure down in Mahindra & Mahindra, Sun Pharma and ITC.

The fund also stayed put with other stocks like ICICI Bank, SBI Life Insurance, Larsen & Toubro, Bharti Airtel, The Great Eastern Shipping Co, Tata Steel, SBI, Gateway Distriparks and Hindustan Aeronautics.

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