There are many types of mutual funds in the market. These funds invest in the market based on different types of investing themes. A few common examples are large-cap, mid-cap, and debt mutual funds. But did you know that few mutual funds invest only in dividend-paying stocks?
Yes! They exist, so let’s find out more about them.
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​​​​​​​Dividend yield mutual funds focus on investing in the shares of companies that consistently pay dividends. These funds allocate 65% of their assets in dividend-paying stocks, per SEBI's guidelines.
How Dividend Yield Mutual Funds Operate?
These funds target companies that pay their shareholders regular and high dividends. The aim is to provide investors with consistent payouts, often annually, offering a sense of security and steady income. These dividends are distributed from the fund's earnings over the past year.
However, mutual funds offering dividends might not always be the best growth option, as their NAV doesn't show significant growth due to the immediate payout of dividends upon reaching a certain level. Thus, dividend mutual funds are best suited for investors seeking regular income streams with a lower risk tolerance.
Benefits of Dividend Yield Funds
Dividend yield funds are appealing for several reasons. They offer the chance for regular dividend payments and are less affected by market fluctuations, providing a buffer against market volatility. Over time, these funds can generate substantial yields on investment. They are attractive for first-time investors looking to venture into mutual funds with the added benefit of regular income.
Performance of Top Dividend Yield Mutual Funds
|
Scheme Name
|
Launch Date
|
AUM (Crore)
|
1 Year
|
3 Years
|
5 Years
|
8 Years
|
Since Launch
|
Minimum Investment
|
|
ABSL Dividend Yield Gr Dir
|
01-01-2013
|
1,276.59
|
51.61
|
28.7
|
22.15
|
17.08
|
14.69
|
Rs 1000
|
|
HDFC Dividend Yield Dir Gr
|
18-12-2020
|
4,564.53
|
47.83
|
28.41
|
-
|
-
|
30.43
|
Rs 100
|
|
ICICI Pru Dividend Yield Equity Dir Gr
|
16-05-2014
|
3,454.30
|
54.82
|
31.97
|
24.34
|
20.55
|
17.74
|
Rs 5000
|
|
LIC MF Dividend Yield Fund Dir Gr
|
17-12-2018
|
110.72
|
49.47
|
22.79
|
21.56
|
-
|
20.99
|
Rs 5000
|
|
SBI Dividend Yield Fund Dir Gr
|
14-03-2023
|
6,447.24
|
-
|
-
|
-
|
-
|
37.78
|
Rs 5000
|
|
Sundaram Dividend Yield Fund Dir Gr
|
01-02-2013
|
782.92
|
45.8
|
22.27
|
20.41
|
19.86
|
15.62
|
Rs 5000
|
|
Tata Dividend Yield Dir Gr
|
20-05-2021
|
780.55
|
43.77
|
-
|
-
|
-
|
20.74
|
Rs 5000
|
|
Templeton India Equity Income Dir Gr
|
01-01-2013
|
1,993.62
|
45.78
|
27.39
|
23.97
|
20.56
|
17.26
|
Rs 5000
|
|
UTI Dividend Yield Gr Dir
|
01-01-2013
|
3,526.69
|
42.02
|
21.65
|
18.95
|
17.4
|
14.43
|
Rs 5000
|
Note: The above date represents returns earned by top dividend yield mutual funds in India
A brief description of top-performing dividend yield mutual funds
ICICI Prudential Dividend Yield Equity Fund
It is designed to achieve medium to long-term capital growth and regular dividends through investments in various dividend-yielding stocks.
Aditya Birla Sun Life Dividend Yield Fund
It is an open-ended equity scheme focused on generating capital appreciation and income by investing in high-dividend-yielding stocks. They have positioned themselves as a leading option for monthly dividends in India.
HDFC Dividend Yield Fund
With a minimum investment requirement of Rs 5,000 for SIP, the HDFC Dividend Yield Fund is a part of the Equity category of HDFC Mutual Funds and stands out as a premier monthly dividend mutual fund.
Who should invest in Dividend Yield Mutual Funds?
If you value a steady stream of income along with the potential for capital growth, dividend-yield mutual funds are an excellent choice. When you invest in top-performing dividend-paying mutual funds, you enjoy regular dividends, making them a solid option for those seeking a balance of equity exposure and reduced risk levels.
These funds are especially appealing to stock market beginners. The companies they invest in tend to be relatively stable and better equipped to handle market volatility. Even during market downturns, these funds typically maintain regular dividend disbursements.
Final Thoughts
Dividend mutual funds can be a good choice if you want a steady income and some tax benefits. However, choose a fund that fits your investment goals and your willingness to take on risk. While you might make more money when the market is doing well, you should also be ready for times when you might make less.​​​​​​​
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