Last Updated on Mar 1, 2023 by Harshit Singh
Dividends are an important aspect of equity-related instruments. Some companies share a part of their profits with the shareholders in the form of dividends. While others don’t offer dividends; instead, they reinvest the profits to establish the company. Read below to find the best dividend paying mutual funds and some salient features that you should know.
Table of Contents
What is dividend paying mutual funds?
Some companies declare dividends on their stocks. Only when a company can make profits can it pay dividends. Hence, the financials of these companies would be strong. Like any other mutual fund, the performance of dividend mutual funds is subjected to market conditions. These are considered moderate to high-level risk instruments.
Though the most common pay-out for dividend mutual funds is annual, a few schemes pay it on a monthly, quarterly, or daily basis. Though most companies strive to pay dividends per the agreement, it is never guaranteed. The amount of the dividend is also not fixed. The Net Asset Value (NAV) should reach the critical value for the fund house to pay the dividends. The fund managers will not limit themselves to the dividend yield but look at several other growth prospects of the company before investing.
8 best dividend paying mutual funds
Here’s the list of the best dividend paying mutual funds in India.
|Name||AUM (Rs. in cr.)||Expense Ratio||Absolute Returns – 1Y (%)|
|HDFC Dividend Yield Fund||3,019.98||0.43||11.79|
|UTI Dividend Yield Fund||2,810.67||1.45||1.99|
|Templeton India Equity Income Fund||1,326.66||1.58||9.65|
|ICICI Pru Dividend Yield Equity Fund||1,215.98||0.66||13.63|
|Aditya Birla SL Dividend Yield Fund||872.96||1.7||13.60|
|Tata Dividend Yield Fund||562.30||0.74||3.70|
|Sundaram Dividend Yield Fund||368.04||1.02||4.85|
|IDBI Dividend Yield Fund||94.00||1.5||2.99|
Note: The data is of date 25th January 2023. The following parameters are used on Tickertape Mutual Fund Screener to get the list of the best dividend paying mutual funds:
- Category: Equity
- Sub-category: Dividend Yield Fund
- Absolute Returns – 1Y: Sort from highest to lowest
Details of the best dividend paying mutual funds
HDFC Dividend Yield Fund
This was launched on 18th December 2020 by HDFC Securities. As of 25th January 2023, HDFC Dividend Yield Fund has a NAV of Rs. 16.01. The minimum investment amount is Rs. 5,000.
UTI Dividend Yield Fund
This was launched on 03rd May 2005 by UTI Mutual Funds. As of 25th January 2023, UTI Dividend Yield Fund has a NAV of Rs. 111.17. The CAGR (Compound Annual Growth Rate) for 3-yr and 5-yr is 16.40% and 10.30%, respectively. The minimum investment amount is Rs. 5,000.
Templeton India Equity Income Fund
This was launched on 05th May 2006 by Franklin Templeton Investments. As of 25th January 2023, Templeton India Equity Income Fund has a NAV of Rs. 94.75. The CAGR of 3-yr and 5-yr is 23.53% and 12.76%, respectively. The minimum investment amount is Rs. 5000.
ICICI Pru Dividend Yield Equity Fund
This was launched on 16th May 2014 by ICICI Prudential Mutual Funds. As of 25th January 2023, ICICI Pru Dividend Yield Equity Fund has a NAV of Rs. 32.01. The CAGR of 3-yr and 5-yr is 23.48% and 10.42%, respectively. The minimum investment amount is Rs. 5,000.
Aditya Birla SL Dividend Yield Fund
This was launched on 27th February 2003 by Aditya Birla Sun Life AMC Limited. As of 25th January 2023, Aditya Birla SL Dividend Yield Fund has a NAV of Rs. 297.93. The CAGR for 3-yr and 5-yr is 18.62% and 8.75%, respectively. The minimum investment amount is Rs. 1,000.
Tata Dividend Yield Fund
This was launched on 03rd May 2021 by Tata Mutual Fund. As of 25th January 2023, Tata Dividend Yield Fund has a NAV of Rs. 11.87. The minimum investment amount is Rs. 1,000.
Sundaram Dividend Yield Fund
This was launched in October 2004 by Sundaram Mutual Fund. As of 25th January 2023, Sundaram Dividend Yield Fund has a NAV of Rs. 93.15. The CAGR of 3-yr and 5-yr is 16.83% and 10.32%, respectively. The minimum investment amount is Rs. 5,000.
IDBI Dividend Yield Fund
This was launched on 21st December 2018 by IDBI Mutual Fund. As of 25th January 2023, IDBI Dividend Yield Fund has a NAV of Rs. 18.25. The CAGR of 3-yr is 16.68%. The minimum investment amount is Rs. 5,000.
Who should invest in dividend paying mutual funds?
Dividend paying mutual funds can be ideal for first-time inventors. Even investors looking for stable income can opt for these funds. However, as mentioned earlier, the dividend is not guaranteed as it depends on the companies and the market conditions.
Features of dividend paying mutual funds
The two features of dividend mutual funds are
- Asset allocation: According to Securities and Exchange Board of India (SEBI) rules, a dividend yield mutual fund must invest at least 65% of the fund corpus in equity and equity-related instruments.
- Risk-reward ratio: As the dividend paying mutual funds deals with stocks, the performance can be volatile. However, compared to other equity-related schemes, dividend mutual funds are less volatile.
Dividend from mutual fund taxability
- If the investment holding period is less than 1 yr, the returns are considered short-term capital gains and taxed at 15%.
- If the investment holding period is more than a year and the returns are over Rs 1 lakh per annum, you are taxed at 10%. No taxes are levied if the returns are less than Rs 1 lakh per annum.
Advantages of dividend paying mutual funds
The advantages that dividend mutual funds can provide an investor are as follows:
- Generally, the underlying companies have strong financials.
- These funds can offer a high yield on dividends in the long term.
- Investors can get exposed to equity funds with less risk.
- Investors can expect stable income at regular intervals.
Disadvantages of dividend paying mutual funds
These are associated with disadvantages as well, as follows:
- When compared to other equity-based schemes, dividend mutual funds may not perform well during a bull market.
- High dividend provision can be advantageous for the investor initially, but the company may not have enough opportunity to expand.
Difference between growth and dividend mutual funds
Similar to dividends, growth is an aspect of mutual funds. In dividend mutual funds, the profits are paid to the investors, while in the case of growth, the profits are reinvested in the fund. Compared to the dividend mutual funds, the profits in the growth option are higher in the long term. Growth mutual funds are preferred by investors who are not looking for regular cash flows from the investment.
Excel your mutual fund analysis with Tickertape Mutual Fund Screener
Finding the right investment that aligns with your investment goals and risk tolerance is difficult, especially when you are given several options. For this, you need to understand each and every mutual fund product, the performance metrics, the risk involved, etc. and compare them to find the right one for you. This is where the Tickertape Mutual Fund Screener comes to your rescue. It allows you to find the right mutual fund based on your financial goals.
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Kickstart your investment journey today by logging on to Tickertape and linking your broker account. Before investing, ensure you understand mutual funds and their types and then proceed to analyse the fundamentals of a fund. Not just that, but keep your investment goals and risk appetite in mind. Happy screening and investing!
1. What is a dividend in mutual funds?
The dividend is a portion of profits provided by a company to the shareholders for investing in their stock.
2. Are non-residents of India eligible for dividend paying mutual funds?
Yes. Non-residents of India are eligible to invest in dividend paying mutual funds.
3. How to know if the fund manager has invested your money in a dividend mutual funds scheme?
As per the SEBI rules, the mutual funds need to disclose entire portfolios of all schemes monthly on their website.
4. What are the top monthly dividend paying mutual funds in India?
You can use the Tickertape Mutual Fund Screener to find the top monthly dividend paying mutual funds in India based on returns. However, the pay-out schedule on the dividend mutual funds varies with the scheme.
5. Do mutual funds pay dividends?
A dividend is a portion of the company’s profits paid to the shareholders. But not all mutual funds pay dividends. Some companies reinvest the profit back into the company for growth and expansion.
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