Last Updated on Jun 27, 2022 by Nikitha

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 learn more about dividend paying mutual funds and some salient features that should know. 

What is dividend paying mutual funds?

Some companies declare dividends on their stocks. Only when a company can make profits, it can 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 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 dividend paying mutual funds 

Here, we’ve listed the dividend paying mutual funds in 2022. 

Note: The information is dated 22 June 2022. The parameters used to filter the list of dividend paying mutual funds on Tickertape are:

  1. Category – Equity 
  2. Sub-Category – Dividend Yield Fund
  3. Plan – Growth
  4. Sorted by Absolute Returns 1 yr
NameAUM (Rs in cr.)Absolute Returns – 1 yr (in %)Expense Ratio (in %)
ICICI Pru Dividend Yield Equity Fund923.119.651
Templeton India Equity Income Fund1,257.179.141.63
HDFC Dividend Yield Fund2,830.037.590.45
IDBI Dividend Yield Fund87.37-0.571.55
Sundaram Dividend Yield Fund275.62-0.672
Tata Dividend Yield Fund592.41-0.930.72
UTI Dividend Yield Fund2,808.21-1.461.49
Aditya Birla SL Dividend Yield Fund787.93-2.611.74

1. UTI Dividend Yield Fund 

This was launched on 03 May 2005 by UTI Mutual Funds. As of 20 June 2022, UTI Dividend Yield Fund has a NAV of Rs 90.59. The CAGR for 3 yrs and 5 yrs are 12.69% and 10.37%, respectively. The minimum investment amount is Rs 5,000. 

2. HDFC Dividend Yield Fund

This was launched on 18 December 2020 by HDFC Securities. As of 20 June 2022, HDFC Dividend Yield Fund has a NAV of Rs 12.86. The minimum investment amount is Rs 5,000. 

3. Templeton India Equity Income Fund

This was launched on 05 May 2006 by Franklin Templeton Investments. As of 20 June 2022, Templeton India Equity Income Fund has a NAV of Rs 81.87. The CAGR of 3 yrs and 5 yrs are 19.51% and 13.63%, respectively. The minimum investment amount is Rs 5000. 

4. ICICI Pru Dividend Yield Equity Fund

This was launched on 16 May 2014 by ICICI Prudential Mutual Funds. As of 20 June 2022, ICICI Pru Dividend Yield Equity Fund has a NAV of Rs 24.25. The CAGR of 3 yrs and 5 yrs are 15.34% and 9.17%, respectively. The minimum investment amount is Rs 5,000. 

5. Aditya Birla SL Dividend Yield Fund

This was launched on 27 February 2003 by Aditya Birla Sun Life AMC Limited. As of 20 June 2022, Aditya Birla SL Dividend Yield Fund has a NAV of Rs 219.98. The CAGR for 3 yrs and 5 yrs are 12.30% and 6.07%, respectively. The minimum investment amount is Rs 1,000. 

6. Tata Dividend Yield Fund 

This was launched on 03 May 2021 by Tata Mutual Fund. As of 20 June 2022, Tata Dividend Yield Fund has a NAV of Rs 9.8023. The minimum investment amount is Rs 1,000. 

7. Sundaram Dividend Yield Fund

This was launched in October 2004 by Sundaram Mutual Fund. As of 17 June 2022, Sundaram Dividend Yield Fund has a NAV of Rs 80.15. The CAGR of 3 yrs and 5 yrs are 13.66% and 11.40%, respectively. The minimum investment amount is Rs 1,000. 

8. IDBI Dividend Yield Fund

This was launched on 21 December 2018 by IDBI Mutual Fund. As of 20 June 2022, IDBI Dividend Yield Fund has a NAV of Rs 14.60. The CAGR of 3 yrs is 14.51%. The minimum investment amount is Rs 1,000. 

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 the dividend mutual funds are 

  1. 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. 
  2. 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 the 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 the 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 the 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. 

FAQs

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.

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