Contents
- What is Dividend Paying Mutual Funds?
- Best Dividend Mutual Funds 2019
- 1. Principal Dividend Yield Fund Direct-Growth
- Important Information
- Why Invest in Principal Dividend Yield Fund?
- 2. UTI Dividend Yield Fund-Direct
- Important Information
- Why Invest in UTI Dividend Yield Fund-Direct?
- 3. Templeton India Equity Income Fund-Direct
- Important Information
- Why Invest in Templeton India Equity Income Fund?
- 4. ICICI Prudential Dividend Yield Equity Fund-Direct
- Important Information
- Why Invest in ICICI Prudential Dividend Yield Equity Fund?
- Top 5 Large Cap Equity Dividend Funds in 2019
- Top 5 Mid Cap Equity Dividend Funds in 2019
- Top 5 Small-Cap Equity Dividend Funds in 2019
- Advantages of Dividend Paying Mutual Funds
- How Do Dividend-Paying Mutual Funds Work?
- Why Invest in Dividend Mutual Funds?
- When are Dividends paid to the Investors?
- Tax Implications of Dividend Mutual Funds
- Conclusion
Mutual Fund schemes in India have evolved over the years. As a result, the top-performing best dividend-paying Mutual Funds in the market keeps on changing. There are different rating methods in place to assess a mutual fund scheme, namely CRISIL, Morning Star, ICRA. These systems evaluate a mutual fund by various parameters like past returns, Standard Deviation, information ratio, etc. Remarkable rating systems also recognize the qualitative and quantitative factors of the Mutual Funds. The summation of all these factors drives to the rating of the top-performing best dividend mutual funds in India.
What is Dividend Paying Mutual Funds?
These are mutual funds that often invest in companies that give dividends. And Dividends, in turn, refer to the profit or revenue are earned by companies and get shared with the shareholders of the company. These profits are the returns that mutual funds get by selling the shares at higher prices than purchased for. Moreover, depending on the scheme, fund managers can either use the profits to purchase stocks or declare a dividend.
You can have predictable returns when you invest in a debt mutual fund. But, in case you invest in an equity-linked fund, your returns will be highly unpredictable. But when you choose an equity-linked fund that gives dividends, you can experience the highest profit which results in brilliant growth for your funds.
Best Dividend Mutual Funds 2019
| Fund Name | Category | Risk | 3 Y Return | 5 Y Return | Turnover Ratio |
|---|---|---|---|---|---|
| Principal Dividend Yield Fund Direct-Growth | Equity (Dividend Yield) | Moderately High | 12.56% | 10.37% | 61% |
| UTI Dividend Yield Fund Direct-Growth | Equity (Dividend Yield) | Moderately High | 10.08% | 8.62% | 4% |
| Templeton India Equity Income Direct Plan-Growth | Equity (Dividend Yield) | Moderately High | 10.12% | 9.95% | 3% |
| ICICI Prudential Dividend Yield Equity Fund Direct-Growth | Equity (Dividend Yield) | Moderately High | 8.37% | 8.84% | 82% |
| Aditya Birla Sun Life Dividend Yield Fund Direct-Growth | Equity (Dividend Yield) | Moderately High | 4.33% | 5.68% | 37% |
1. Principal Dividend Yield Fund Direct-Growth
The scheme attempts to render capital appreciation by investing predominantly in a well-diversified portfolio of companies that have a relatively high dividend yield.
Important Information
| Launch Date | 25th November 1994 |
|---|---|
| Category | Dividend Yield |
| Benchmark | CRISIL Hybrid 50+50 Moderate Index (VR Balanced TRI) |
| Expense Ratio | 2.11% |
| AUM | ₹197 crore |
| Risk | Moderately High |
| Fund Managers | Dihant Shah |
| Investment instruments | Equity and cash |
Why Invest in Principal Dividend Yield Fund?
- The fund has produced superior returns over a multi-trailing time, thereby making it one of the most sought-after funds in the category.
- However, the fund bears from the low assets under management (AUM) which is below Rs 500 crore.
- Thus the expense of fund management becomes high. Also, the fund has a marginally greater risk when compared to the category average.
2. UTI Dividend Yield Fund-Direct
The scheme attempts to generate long-term capital appreciation and income by investing primarily in dividend-yielding equity and equity-related securities.
Important Information
| Launch Date | 1 Feb 2003 |
|---|---|
| Category | Dividend Yield |
| Benchmark | CRISIL Hybrid 50+50 Moderate Index (VR Balanced TRI) |
| Expense Ratio | 1.53% |
| Risk | Moderately High |
| AUM | ₹2,438 Cr |
| Fund Managers | Swati Anil Kulkarni |
| Investment instruments | Equity and cash |
Why Invest in UTI Dividend Yield Fund-Direct?
- The fund has produced higher returns over the last one-year period.
- The fund proceeds with a low-risk profile as compared to the category average but has a higher expense ratio despite sizeable assets under management.
- The fund’s beta is 0.96 which means a balanced nature concerning aggressive and conservative stocks.
3. Templeton India Equity Income Fund-Direct
The income funds attempt to give a combination of regular income and long-term capital appreciation by investing in stocks that have an engaging dividend yield or potentially engaging dividend yield.
Important Information
| Launch Date | 19th February 1996 |
|---|---|
| Category | Dividend Yield |
| Benchmark | CRISIL Hybrid 50+50 Moderate Index (VR Balanced TRI) |
| Expense Ratio | 1.83% |
| Risk | Moderately High |
| AUM | ₹940 Cr |
| Fund Managers | Srikesh Nair, Lakshminath Reddy, Anand Radhakrishnan |
| Investment instruments | Equity and cash |
Why Invest in Templeton India Equity Income Fund?
- The fund has created superior returns over a multi-trailing period.
- However, the fund sustains from a high expense ratio, despite average assets under management is between Rs. 500 crore and Rs. 1000 crore.
- Also, the fund has a marginally lower risk when compared to the average category.
4. ICICI Prudential Dividend Yield Equity Fund-Direct
This scheme provides medium to long-term capital appreciation and dividend distribution by investing in a well-expanded portfolio of primarily equity and equity-related instruments, which give high dividend yield.
Important Information
| Launch Date | 13th October 1993 |
|---|---|
| Category | Dividend Yield |
| Benchmark | CRISIL Hybrid 50+50 Moderate Index (VR Balanced TRI) |
| Expense Ratio | 1.79% |
| Risk | Moderately High |
| AUM | ₹173 crore |
| Fund Managers | Priyanka Khandelwal, Mrinal Singh, Mittul Kalawadia |
| Investment instruments | Equity and cash |
Why Invest in ICICI Prudential Dividend Yield Equity Fund?
- The fund has produced excellent returns over the multi-trailing years.
- The fund has a marginally lower risk when compared to the category average. However, the fund suffers from a high expense ratio due to low assets under management that is below Rs.500 crore.
- The beta for the fund is 1.01 thereby reflecting a well-balanced characteristic of the mutual fund portfolio thus indicating that the returns are a result of stock selection and not the market movement.
Top 5 Large Cap Equity Dividend Funds in 2019
| Fund Name | Net Asset Value (NAV) | 3Y Return | 5Y Return |
|---|---|---|---|
| Reliance Large Cap Fund Normal Dividend, Payout | ₹15.51 | 12.2% | 11.6% |
| SBI Bluechip Fund Normal Dividend, Payout | ₹22.7383 | 9% | 11.7% |
| ICICI Prudential Bluechip Fund Normal Dividend, Payout | ₹21.46 | 10.2% | 10.1% |
| Indiabulls Blue Chip Fund Normal Dividend, Payout | ₹12.05 | 11.3% | 10.5% |
| Essel Large Cap Equity Fund Normal Dividend, Payout | ₹14.6821 | 9.3% | 10.2% |
Top 5 Mid Cap Equity Dividend Funds in 2019
| Fund Name | Net Asset Value (NAV) | 3Y Return | 5Y Return |
|---|---|---|---|
| Kotak Emerging Equity Scheme Normal Dividend, Payout | ₹21.526 | 8.4% | 14.8% |
| Taurus Discovery (Midcap) Fund Normal Dividend, Payout | ₹36.71 | 8.6% | 11.4% |
| Sundaram Mid Cap Fund Normal Dividend, Payout | ₹31.4731 | 6% | 11.3% |
| L&T Midcap Fund Normal Dividend, Payout | ₹40.84 | 9.8% | 13.6% |
| BNP Paribas Mid Cap Fund Normal Dividend, Payout | ₹29.52 | 5.6% | 10.8% |
Top 5 Small-Cap Equity Dividend Funds in 2019
| Fund Name | Net Asset Value (NAV) | 3Y Return | 5Y Return |
|---|---|---|---|
| SBI Small Cap Fund Normal Dividend, Payout | ₹29.8569 | 13% | 19.6% |
| L&T Emerging Businesses Fund Normal Dividend, Payout | ₹18.02 | 11.2% | 13.6% |
| Aditya Birla Sun Life Small Cap Fund Normal Dividend, Payout | ₹19.5068 | 4.5% | 10.5% |
| Reliance Small Cap Fund Normal Dividend, Payout | ₹27.2021 | 11.1% | 14.6% |
| HDFC Small Cap Fund Normal Dividend, Payout | ₹21.532 | 12% | 13.8% |
Advantages of Dividend Paying Mutual Funds
There are four advantages of dividend-paying mutual funds:
- A river of uniform cash flow is formed through this investment.
- Most mutual funds invest in companies that are experienced adequate to pay stable dividends and hence the risk is undertaken is also more limited.
- Dividend income can serve as an additional income over and above your regular flow of cash.
- The most important of all is that dividends are tax-exempt in the hands of the investors.
How Do Dividend-Paying Mutual Funds Work?
By Dividend paying mutual funds, investors are equipped with annualized payouts. The payouts will be made regularly and therefore as an investor, you feel safe and secure with these funds. Also, these dividends will be paid from the revenues earned by the fund during the previous year. Since the dividends are paid out on reaching a specific level, most of the mutual funds with the dividend will not show high growth in their Net Asset Value (NAV).
Why Invest in Dividend Mutual Funds?
People looking to gain a steady monthly income can choose from a variety of options available today in the market. Some of them being investing in monthly income schemes of post offices, pension schemes for retired people, fixed deposits, etc.
However, although these options can grant themselves to be reliable options, they would not give you strong returns. A dividend mutual fund can come to your rescue in this condition.
Various funds provide monthly dividends and the investor can choose the ideal fund based on his/her requirement.
When are Dividends paid to the Investors?
An Asset Management company or a company that controls assets can decide to pay dividends daily, monthly, quarterly or annually. But, this can vary from one scheme to another. Even if most of the best dividend mutual funds attempt to pay dividends and stick to their respective mandate, it is never guaranteed. Also, the amount is not a fixed one. However, it is important for an investor to realize that under the dividend option, the Net Asset Value is not permitted to grow higher. Therefore, as soon as the Net Value reaches a specific level, the fund house will choose to pay the dividends.
Tax Implications of Dividend Mutual Funds
Dividends from each mutual fund are tax-free in the control of investors. Though, a dividend distribution tax (DDT) of 28.84% for debt funds are handled by fund houses and includes surcharge and cess. However, there is no dividend distribution tax in an equity mutual fund.
A dividend option is a well-suited option for investors who do not incline towards taking a risk in investments and also for those who need cash flow. Depending on investment goals, an investor can opt for growth or dividend option. Therefore, people who are generally keen to grow their wealth over the long term, usually opt for growth options.
Conclusion
Dividend refers to the part of the profit which a company shares with its shareholders. A dividend yield fund is a mutual fund that invests in shares/stocks of companies that pay high dividends. Since companies can afford to pay high dividends only if they have substantial profits to distribute, typically dividend yield funds tend to invest almost exclusively in high-quality stocks with a proven track record. Investors looking for regular dividend income should keep limitations and effects in mind, before going for investing in high dividend-paying mutual funds.
If you want to gain knowledge about the Best Performing Mutual Funds India. And also want to make the best profits on your money, visit our website Wealthbucket. Let us guide you to obtain the benefits Debt Mutual fund, Large Cap Mutual fund or Multi-Cap Mutual fund, to achieve your objectives.
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