8 Best Dividend Yield Mutual Funds in India to Invest in April 2023
Dividend Yield Mutual Funds are equity funds that invest at least 65% of their total assets in stocks of companies that regularly declare dividends. High dividend mutual funds usually invest in stocks of profitable companies that pay regular dividends.
We have curated a list of best dividend paying mutual funds in India. Let’s dive in!
Top 8 Dividend Paying Mutual Funds in India
Here are the best dividend yield mutual funds 2023 in India that you can invest:
| Mutual Fund Scheme Name | Features |
| ICICI Prudential Dividend Yield Equity Fund – Direct Plan – Growth | NAV: ₹31.81 Expense Ratio: 0.65% AUM: ₹1258.36Crore |
| UTI Dividend Yield Fund – Direct Plan – Growth | NAV: ₹102.25 Expense Ratio: 2.08% AUM: ₹2786.59 Crore |
| IDBI Dividend Yield Fund – Direct Plan – Growth | NAV: ₹16.79 Expense Ratio: 2.51% AUM: ₹85.26Crore |
| Templeton India Equity Income Fund – Direct – Growth | NAV: ₹88.39 Expense Ratio: 2.26% AUM: ₹1350.66 Crore |
| Sundaram Dividend Yield Fund – Direct Plan – Growth | NAV: ₹86.14 Expense Ratio: 2.54% AUM: ₹382.67 Crore |
| Aditya Birla Sun Life Dividend Yield Fund – Direct Plan – Growth | NAV: ₹ 268.79 Expense Ratio: 2.43 AUM: ₹850.28Crore |
| HDFC Dividend Yield Fund – Direct Plan – Growth | NAV: ₹15.17 Expense Ratio: 2.01% AUM: ₹2933.73Crore |
| Tata Dividend Yield Fund – Direct Plan – Growth | NAV: ₹11.16 Expense Ratio: 2.69% AUM: ₹471.17Crore |
*This table is for educational purposes only. Navi doesn’t take responsibility for the accuracy of the data, nor should it be construed as an invitation to invest in any of these mutual fund schemes.
Disclaimer: Mutual fund investments are subject to market risks. Read all scheme-related documents carefully.
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Performance of Best Dividend Yield Mutual Funds 2023
Here is a detailed overview of the above-mentioned dividend yield mutual funds:
1. ICICI Prudential Dividend Yield Equity Fund – Direct Plan – Growth
This dividend-yield mutual fund scheme was launched on May 16, 2014. Mittul Kalawadia and Sharmila D’mello are the present fund managers of this scheme. This fund invests 88.37% of its assets in domestic equities across market capitalisations. To invest in this mutual fund scheme, you must be prepared to overcome moderate to massive losses as per the market. Therefore, you need to be a seasoned investor with a high-risk capacity. Also, it is one of the best dividend mutual funds.
- NAV: ₹31.81
- Expense Ratio: 0.65%
- AUM: ₹1258.36 Crore
- Risk: Very high
- Minimum Investment: SIP ₹5,000, Lump Sum ₹100
- Type of Fund: Dividend Yield Fund
- Annualised 1-year Return: 7.7%
- Annualised 3-year Return: 40.3%
- Annualised 5-year Return: 12.3%
2. UTI Dividend Yield Fund – Direct Plan – Growth
This mutual fund was incorporated on January 1, 2013. Amit Premchandani is the current fund manager of this scheme. It invests 97.53% of its investments in domestic equities of companies that announce dividend yields regularly. This investment is done across different market capitalisations and sectors. This scheme will levy an exit load of 1% on selling funds within 365 days.
- NAV: ₹102.25
- Expense Ratio: 2.08 %
- AUM: ₹2886.59 Crore
- Risk: Very high
- Minimum Investment: SIP ₹500, Lump Sum ₹5000
- Type of Fund: Dividend Yield Fund
- Annualised 1-year Return: -3.8%
- Annualised 3-year Return: 28.1%
- Annualised 5-year Return: 11.3%
3. IDBI Dividend Yield Fund – Direct Plan – Growth
This dividend-yield fund was launched on December 21, 2018. Alok Ranjan is presently the fund manager of this scheme. This dividend-yield mutual fund holds 97.42% of its investment in domestic equities. Out of this, 59.1% goes to large cap, 18.99% to mid cap and 16.78% to small cap stocks. It aims to provide long-term capital gains for investors by investing in companies regularly offering dividends.
- NAV: ₹16.79
- Expense Ratio: 2.51%
- AUM: ₹85.26 Crore
- Risk: Very high
- Minimum Investment: SIP ₹500, Lump Sum ₹5000
- Type of Fund: Dividend Yield Fund
- Annualised 1-year Return: -1.1%
- Annualised 3-year Return: 27.6%
- Annualised 5-year Return: 14.7
4. Templeton India Equity Income Fund – Direct – Growth
This fund invests 75.83% investments in domestic equities across different market capitalisations. It aims to provide a proportionate combination of regular and long term capital growth by investing in equities and equity-related instruments of companies that offer regular dividends. Investors must have advanced knowledge about this market and a high-risk appetite to invest here. This fund was introduced on January 1, 2013. Mayank Bukrediwala, Anand Radhakrishnan and Rajasa Kakulavarapu are the fund managers of this scheme.
- NAV: ₹88.39
- Expense Ratio: 2.26%
- AUM: ₹1350.66 Crore
- Risk: Moderately high
- Minimum Investment: SIP ₹500, Lump Sum ₹5000
- Type of Fund: Dividend Yield fund
- Annualised 1-year Return: 6.7%
- Annualised 3-year Return: 40.4%
- Annualised 5-year Return: 14.3%
5. Sundaram Dividend Yield Fund – Direct Plan – Growth
The Sundaram Dividend Yield Fund was introduced to investors on January 1, 2013. Ravi Gopalakrishnan is the current fund manager of this scheme. This scheme invests 92.25% of its investment in domestic equities of companies with high dividend yields across market capitalisation. The scheme defines high dividend yield stocks as ones offering 1.5 times the dividend-yield of NSE Nifty.
- NAV: ₹86.14
- Expense Ratio: 2.54 %
- AUM: ₹382.67 Crore
- Risk: Very high
- Minimum Investment: SIP ₹500, Lump Sum ₹5000
- Type of Fund: Dividend Yield Fund
- Annualised 1-year Return: 1.6%
- Annualised 3-year Return: 29.3%
- Annualised 5-year Return: 11.7%
6. Aditya Birla Sun Life Dividend Yield Fund – Direct Plan – Growth
This dividend fund scheme was launched on January 1, 2013. It invests 92.25% of its investments in domestic equities that include large, mid and small cap stocks. It aims for capital appreciation and regular income from dividends by investing in an efficiently diversified portfolio. However, only seasoned investors with elaborate knowledge of this market and its trends should take the risks of investing here. This scheme carries the risks of medium to high losses.
- NAV: ₹268.79
- Expense Ratio:2.43%
- AUM: ₹850.28 Crore
- Risk: Very high
- Minimum Investment: SIP ₹1000, Lump Sum ₹5000
- Type of Fund: Dividend Yield Fund
- Annualised 1-year Return: 5.5%
- Annualised 3-year Return: 33.2%
- Annualised 5-year Return: 10.2%
7. HDFC Dividend Yield Fund – Direct Plan – Growth
This scheme was launched on December 14, 2020. Gopal Agarwal and Priya Ranjan are the fund managers of the HDFC Dividend Yield Fund. It holds 99.93% investment in domestic equities across large, mid and small cap stocks. This scheme aims to generate dividends and capital appreciation by investing in equities and equity-related instruments of companies that yield regular dividends.
- NAV: ₹5.17
- Expense Ratio: 2.01%
- AUM: ₹2933.73 Crore
- Risk: Very high
- Minimum Investment: SIP ₹100, Lump Sum ₹100
- Type of Fund: Dividend Yield Fund
- Annualised 1-year Return: 9.4%
- Annualised 3-year Return: NA
- Annualised 5-year Return: NA
8. Tata Dividend Yield Fund – Direct Plan – Growth
This dividend-yield fund scheme was launched on May 20, 2021. Sailesh Jain, Arvindkumar Kumaresan Chetty and Murthy Nagaranjan are its fund managers. This fund holds 97.74% of its total assets in domestic equities of large, mid and small cap companies. It also aims to provide capital appreciation by investing in a diversified portfolio that includes equities of firms that offer regular and high dividends. Also, it levies an exit load of 1% if you sell the funds before a year.
- NAV: ₹11.16
- Expense Ratio: 2.69%
- AUM: ₹471.17 Crore
- Risk: Very high
- Minimum Investment: SIP ₹150, Lump Sum ₹5000
- Type of Fund: Dividend Yield Fund
- Annualised 1-year Return: 4.0%
- Annualised 3-year Return: NA
- Annualised 5-year Return: NA
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Features of Dividend Yield Funds
Here are two significant characteristics of dividend yield mutual funds:
1. Asset Allocation
As per SEBI guidelines, this fund needs to invest a minimum of 65% of the assets in equity and equity-based instruments.
2. Risk-Reward Ratio
These funds usually deal with stocks. Their performance is affected by market fluctuations. That being said, since these schemes invest in stocks of the best companies, they are less volatile than most other equity mutual funds.
3. Regular Source of Income
Dividend paying mutual funds offer a stable source of income through equity investments. You can use the money earned to invest in more mutual fund units.
Benefits of Dividend Yield Mutual Funds
Here are the main advantages of investing in dividend yield mutual funds:
- Has the potential to provide regular dividend payouts.
- Good for first-time equity investors.
- Considerably reduces market volatility.
- Has the potential to pay higher dividends in the long run.
- Market fluctuations do not affect the underlying companies to a great extent.
Who Can Invest in Dividend Yield Mutual Funds?
- First-time equity investors can invest in dividend yield mutual funds.
- Investors looking for regular dividend income.
- Good for risk-averse investors.
- Investors who have retired and are looking for a stable, regular source of income.
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How to Invest in Dividend Yield Mutual Funds?
Here are the basic steps to follow to invest in the best dividend yield mutual funds.
- Step 1
Conduct thorough research on dividend yield mutual funds taking into consideration their past performance, risk levels, expense ratio, etc.
- Step 2
Shortlist some of the mutual funds and choose the one where you wish to invest based on your investment goals and risk appetite.
- Step 3
Ensure that your shortlisted mutual fund schemes are registered under AMFI. You can confirm the same by looking for the distributor’s AMFI Registration Number (ARN)
- Step 4
Visit the mutual fund branch office or its online portal to invest in your preferred mutual funds directly.
- Step 5
You can also visit a branch office of intermediaries like banks and NBFCs to invest in a high dividend mutual fund.
How to Invest in Dividend Yield Mutual Funds?
Here are the basic steps to follow to invest in the best dividend yield mutual funds.
- Conduct thorough research on dividend yield mutual funds taking into consideration their past performance, risk levels, expense ratio, etc.
- Shortlist some of the mutual funds and choose the one where you wish to invest based on your investment goals and risk appetite.
- Ensure that your shortlisted mutual fund schemes are registered under AMFI. You can confirm the same by looking for the distributor’s AMFI Registration Number (ARN)
- Visit the mutual fund branch office or its online portal to invest in your preferred mutual funds directly.
- You can also visit a branch office of intermediaries like banks and NBFCs to invest in a high dividend mutual fund.
Suitability of Dividend Paying Mutual Fund Schemes
Since these funds invest in companies with favourable cash flows, the dividends are available regularly. Individuals can take advantage of these dividend payments by allocating their savings to these schemes.
Dividend paying funds are ideal for investors looking to get exposure to the equity market without facing too much risk. The dividends earned may not be sufficient, but no earning can be ignored.
While investing in dividend paying mutual funds, take into account the following aspects:
- Risk appetite
- Investment objective
- Fund manager’s experience
- Expense ratio
- Exit load
- Regular or direct plan
Taxation of Dividend Paying Mutual Funds
Until 31st March 2020, dividend income from mutual funds was tax-free. However, after 1st April 2020, according to the Finance Act (2020), dividend income is taxable upon withdrawal.
A TDS of 10% is also imposed on dividend distributions of more than Rs. 5000. As a measure of COVID-19 relief, until 31st March 2021, the TDS rate of mutual fund dividend income was reduced to 7.5%.
The dividend income is also taxable depending on the holding period:
1. Long-Term Capital Gains (LTCG)
When the holding period of fund units is more than 12 months, a tax of 10% is applicable on the gains upon redemption. However, only the gains above Rs. 1,00,000 per annum are eligible for taxation. There is no tax for gains up to Rs 1,00,000.
2. Short-Term Capital Gains (STCG)
If the holding period of scheme units is up to 12 months, the tax rate on gains is 15%.
Final Word
This blog has shown all the details of the best dividend yield mutual funds 2023 where you can start investing. Dividend Yield Funds are open-ended equity funds primarily investing in dividend paying stocks. The fund managers invest in the stocks of companies having the potential to provide regular payouts.
However, a fund house cannot guarantee dividends and the performance of this type of scheme is impacted by market volatility.
Dividend yield mutual funds sound complex? Start investing with Navi Mutual Fund at SIP of just Rs.10! It’s low cost, diverse, and much more. Suitable to begin your investing journey with.
FAQs
Dividends from mutual funds are not taxed separately. Instead, they are added to your annual income and taxed as per your applicable income tax slab rates.
The frequency of dividend payout in dividend yield funds is determined by the management, which can be monthly, quarterly or biannually. A special dividend is a one-time payment paid outside of the scheduled dividend payouts.
Tax-saving mutual funds have a mandatory lock-in period of 3 years.
Fund managers design dividend yielding schemes keeping in mind SEBI norms. They make alterations in a portfolio after thorough market analysis and extensive research. A fund’s performance is based on the effectiveness of a manager’s decisions. A well-informed manager is more likely to achieve the scheme’s predetermined objective.
Exit load denotes a fee that an investor has to pay if he redeems his units prematurely. This charge varies from one scheme to another. Make sure to read the scheme-related documents carefully before you invest in a fund.
A fund house levies an annual maintenance fee on the investors to cover the costs related to administration and operations. This fee is called an expense ratio. This charge affects a fund’s NAV, which influences the returns.
When a fund house offers a scheme to an investor without the involvement of any distributor or broker, it is a direct plan. On the other hand, regular plans engage third parties for investing in mutual funds.
Individuals can allocate their resources to these funds via two modes – systematic investment plan (SIP) and lump-sum investment plan. Under the SIP mode, an individual can invest at regular intervals such as yearly, quarterly or monthly. A lump-sum route involves investing the entire sum in one go.
Dividend yield mutual funds invest in equities and equity-related instruments of companies that regularly offer high dividends to their shareholders. These are high profit-making companies with good track records. As this fund focuses on dividend yield, these mutual funds will not invest in companies that pay good dividends but have very high share prices. This is because their dividend yield will likely be low.
Since this mutual fund invests in companies that are stable, investors with moderately high risk appetite can invest here. Also, having a dividend yield mutual fund in one’s portfolio adds portfolio diversification and regular returns.
Dividend funds invest in companies that offer regular dividends owing to their excellent performance in the market. However, returns from equity assets are rarely very stable and will vary depending on bullish or bearish market condtions. Investors with low-risk investors should avoid investing in these funds. Meanwhile, nvestors with moderate risk appetite will find these funds suitable.
Like other equity mutual funds, you need to limit your exposure to a particular style of investing as per your risk appetite. One way to invest is to follow the 50:30:20 rule. According to this, you should regularly invest 20% of your salary in various investments while spending 50% on your basic needs and 30% on other requirements.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
