Dividend Yield Funds

Fund categories

Fund Name
ICICI Pru Dividend Yield Equity Fund - Direct (G) Dividend Yield Fund \| Equity	13.60%	₹5,000	₹6,232.17	Invest
Tata Dividend Yield Fund - Direct (G) Dividend Yield Fund \| Equity	11.74%	₹5,000	₹1,015.62	Invest
LIC MF Dividend Yield Fund - Direct (G) Dividend Yield Fund \| Equity	9.51%	₹5,000	₹697.98	Invest
Baroda BNP Paribas Dividend Yield Fund - Dir (G) Dividend Yield Fund \| Equity	8.63%	₹1,000	₹870.30	Invest
HDFC Dividend Yield Fund - Direct (G) Dividend Yield Fund \| Equity	6.90%	₹100	₹6,394.28	Invest
SBI Dividend Yield Fund - Direct (G) Dividend Yield Fund \| Equity	5.83%	₹5,000	₹9,278.89	Invest
Sundaram Dividend Yield Fund - Direct (G) Dividend Yield Fund \| Equity	5.68%	₹5,000	₹919.75	Invest
UTI-Dividend Yield Fund - Direct (G) Dividend Yield Fund \| Equity	5.53%	₹5,000	₹3,904.04	Invest
Franklin India Dividend Yield Fund - Direct (G) Dividend Yield Fund \| Equity	2.60%	₹5,000	₹2,416.60	Invest
Aditya Birla SL Dividend Yield Fund - Direct (G) Dividend Yield Fund \| Equity	2.24%	₹1,000	₹1,489.75	Invest

ICICI Pru Dividend Yield Equity Fund - Direct (G)

Equity | Dividend Yield Fund

1Y returns

13.60%

Min. Invest

₹5,000

AUM

₹6,232.17 Cr

Tata Dividend Yield Fund - Direct (G)

Equity | Dividend Yield Fund

1Y returns

11.74%

Min. Invest

₹5,000

AUM

₹1,015.62 Cr

LIC MF Dividend Yield Fund - Direct (G)

Equity | Dividend Yield Fund

1Y returns

9.51%

Min. Invest

₹5,000

AUM

₹697.98 Cr

Baroda BNP Paribas Dividend Yield Fund - Dir (G)

Equity | Dividend Yield Fund

1Y returns

8.63%

Min. Invest

₹1,000

AUM

₹870.30 Cr

HDFC Dividend Yield Fund - Direct (G)

Equity | Dividend Yield Fund

1Y returns

6.90%

Min. Invest

₹100

AUM

₹6,394.28 Cr

SBI Dividend Yield Fund - Direct (G)

Equity | Dividend Yield Fund

1Y returns

5.83%

Min. Invest

₹5,000

AUM

₹9,278.89 Cr

Sundaram Dividend Yield Fund - Direct (G)

Equity | Dividend Yield Fund

1Y returns

5.68%

Min. Invest

₹5,000

AUM

₹919.75 Cr

UTI-Dividend Yield Fund - Direct (G)

Equity | Dividend Yield Fund

1Y returns

5.53%

Min. Invest

₹5,000

AUM

₹3,904.04 Cr

Franklin India Dividend Yield Fund - Direct (G)

Equity | Dividend Yield Fund

1Y returns

2.60%

Min. Invest

₹5,000

AUM

₹2,416.60 Cr

Aditya Birla SL Dividend Yield Fund - Direct (G)

Equity | Dividend Yield Fund

1Y returns

2.24%

Min. Invest

₹1,000

AUM

₹1,489.75 Cr

What is a Dividend Yield Mutual Fund?

A Dividend Yield Mutual Fund primarily invests in equities that offer high dividend yields. This means it targets companies that pay out a substantial portion of their profits as dividends to shareholders. These funds aim to provide investors with regular income through dividends. They do this while simultaneously offering the potential for capital appreciation. Hence, it can be suitable for investors seeking steady returns along with the possibility of growth in their investments.

Characteristics of Dividend Yield Funds

These funds are specialized mutual funds that focus on investing in companies with a consistent track record of dividend payments. These funds target companies that typically have stable business models, strong cash flows, and a shareholder-friendly approach to profit distribution. Below are some more characteristics of the fund: Conservative approach: Dividend yield fund schemes invest in established, financially stable companies with consistent dividend-paying histories. This means they often favour value stocks over growth stocks.
Sector concentration: The best dividend yield mutual funds tend to have higher exposure to sectors known for steady dividends. This includes sectors such as utilities, consumer staples, and real estate investment trusts (REITs).
Lower volatility: These funds generally exhibit less price volatility compared to growth-oriented funds. This is because they focus on mature companies with stable cash flows. Doing so helps them offer a buffer during market downturns.

How do Dividend Yield Funds work?

These funds operate by identifying and investing in stocks that offer higher dividend yields compared to market averages. The fund managers employ specific strategies to select companies that not only pay regular dividends but also demonstrate potential for sustainable dividend growth and capital appreciation. Here are some other key factors as well: Portfolio construction: The best dividend yield funds create a diversified portfolio of these high-yielding stocks . They often do it across various sectors to balance income potential with risk management.
Dividend collection: As the companies in the fund's portfolio pay out dividends, the fund collects these payments on behalf of its investors.
Distribution to Investors: The fund then distributes the collected dividends to its shareholders, typically on a regular schedule (e.g., quarterly or annually). Investors can usually choose to receive these distributions as cash or reinvest them to buy additional fund shares.

Factors to consider before investing in Dividend Yield Mutual Fund Schemes.

Before investing in these funds, investors need to understand several crucial aspects that can impact their investment outcomes. These funds require careful evaluation of certain other factors as well that are mentioned below: Dividend sustainability: Assess the ability of the companies in the fund's portfolio to maintain their dividend payments over time. Look for consistent dividend growth and reasonable payout ratios.
Fund expense ratio: Compare the fund's expense ratio to similar funds. Lower fees can significantly impact your long-term returns, especially for income-focused investments.
Tax implications: Understand the tax treatment of dividend income before investing. In some cases, dividend income may be taxed differently than capital gains.
Fund performance: Review the fund's historical performance, both in terms of total higher return (price appreciation plus dividends) and how it has fared during market downturns.

Risks associated with Dividend Yield Mutual Fund Schemes

While dividend yield funds are often considered relatively stable investments, they come with their own set of risks that investors should be aware of. For more clarity here are some risks that you must be aware of:

Interest rate sensitivity: Dividend-paying stocks often compete with fixed-income investments. When interest rates rise, these funds may become less attractive to investors, leading to price declines.

Sector concentration risk: Dividend yield funds schemes tend to be heavily invested in specific sectors known for high dividends (e.g., utilities, REITs). This concentration can lead to underperformance if these sectors face challenges or market sentiment shifts.

Dividend trap: Some companies maintain high dividend yields despite deteriorating financial health. If the fund invests in such stocks, it risks capital loss if the company eventually cuts its dividend or faces financial distress.

Limited growth potential: Dividend yield funds risk missing out on growth prospects presented by younger, rapidly expanding companies that reinvest profits instead of paying dividends. This is because they can sometimes concentrate too much on established, dividend-paying businesses. Lower total returns during bull markets could come from this.

Taxation Rules Regarding Dividend Yield Mutual Funds

Dividend income from mutual funds is taxable in the investor's hands as per their income tax slab. For equity dividend funds (>65% in stocks), dividends are taxed at 10% if they exceed ₹5,000 annually. For debt fund dividends, they're taxed at the investor's slab rate. Mutual fund companies deduct TDS at 10% if the dividend exceeds ₹5,000 in a financial year. NRI investors face TDS at 20% plus applicable surcharge and cess.

FAQ’s

Are dividend yield funds a good investment?

Dividend yield funds can be good for income-seeking investors. However, suitability depends on individual financial goals and high risk appetite.

Where are dividend yield funds invested?

These funds primarily invest in stocks of companies with high dividend yields. They do this often in sectors like utilities, REITs, and consumer staples.

Can dividend yield funds be a source of passive income?

Yes, dividend yield funds can provide regular passive income through dividend distributions. This makes them quite attractive for income-oriented investors.

Who can invest in dividend yield funds?

Anyone can invest, but they are particularly suitable for income-seeking investors, retirees, or those nearing retirement looking for regular cash flow.

What is the Minimum Investment in a Dividend Yield Fund?

Minimum investments vary by fund and provider, typically ranging from ₹500 to ₹5,000 for SIPs or ₹1,000-₹10,000 lump sum.

What kind of returns can I earn from Dividend Yield?

Returns vary but typically include regular dividend income plus potential capital appreciation. Historical returns often range from 5-10% annually.

How do I invest in Dividend Yield Funds?

Invest through a brokerage account, mutual fund company, or financial advisor. Choose a fund, complete the application, and transfer funds.

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