Updated : Apr 19, 2024 Dividend mutual funds invest in firms which have a track record of raising dividends or paying out high dividend yields. These funds are appropriate for investors with a low-risk tolerance. Watch this video to know more
Investing in mutual funds offers several benefits such as professional management, diversification, liquidity, low cost, tax benefits and whatnot. today, we are gonna talk about dividend yield mutual funds. Those equity funds invest in equity and equity-associated instruments of companies that are known to declare high dividends.
Now we all know that dividends are an important aspect of investing. Many companies share a portion of their profits with their shareholders by declaring dividends.
However, a company can only declare high dividends only if it makes good profits. Therefore, most of these stocks belong to profit-making companies with an excellent track record.
Dividend mutual funds invest in firms which have a track record of raising dividends or paying out high dividend yields. These funds are appropriate for investors with a low-risk tolerance. According to the Securities and Exchange Board of India, a dividend yield fund needs to invest at least 65% of its portfolio in dividend-yielding products.
Let's also take a look at top dividend yield mutual funds
According to the data available on AMFI, ICICI Prudential Dividend Yield Equity Fund has delivered over 53 per cent returns in the last year.
Aditya Birla Sun Life Dividend Yield Fund and LIC MF Dividend Yield Fund have delivered over 50 per cent returns in the last year.
Tata Dividend Yield Fund and HDFC Dividend Yield Fund have delivered over 45 per cent returns in the last year.
According to Axis Securities, various stocks have delivered significant dividends in the past 12 months. In its recent report, it has mentioned names like Vedanta, Coal India, IOC, Power Grid, Ashok Leyland and Aster DM Healthcare which are among the top dividend yield-paying stocks.
Lastly, it is important to note that in the case of dividend yield funds, no fixed amount is guaranteed as dividend income per month and of course mutual fund investments are subject to market risks and there are no guaranteed returns.
However, experts believe that dividend mutual funds typically offer lower volatility than other equity funds, as dividend-paying stocks tend to be less affected by market fluctuations and have stable growth prospects.
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