Forget fixed deposits. Here are 5 high-dividend paying mutual fund schemes you could invest in

Interest rates on fixed deposits have taken a plunge over the past few quarters with key interest rates at multi-year lows. Major banks, both private and public sector, have reduced their interest rates on fixed deposits. Private banks are offering 6.5 per cent for fixed deposits that run for a period of 180 to 364 days.

However, the country's largest lender State Bank of India slashed rates to 6.50 per cent on fixed deposits for a period of 46 to 179 days - among the lowest rates in the indusrty.

Further, Reserve Bank of India's Repo and reverse repo rates are 6.25 per cent and 5.75 per cent, respectively.

"Low inflation in the past few years has helped the Reserve Bank of India (RBI) reduce interest rates consistently," says Dinesh Rohira, Founder & CEO, 5nance.com.

Contributing to the steady rate decline was demonetisation that flooded banks with nearly Rs 15 lakh crore in total, but with a marginal to nil credit growth.

So in order to push lending, experts say that rates could fall up to 0.50 per cent this year.

This is definitely good news for the economy as businesses will be able to grow and individuals can access cheap credit. However, this isn't so for your investment! Here's why:

Since interest from fixed deposits are are at a 7 per cent low or less, if you invest Rs 1 lakh in a five-year fixed deposit, you will earn only Rs 7,000 as interest per year.

Now, if you are in the highest tax bracket, you will pay 30 per cent of the interest earned as income tax, that is, Rs 2,100, bringing down your net earnings to Rs 5,000, a return of 5 per cent.

How can you beat this? High-paying dividend stock option

"Dividend yielding stocks often offer investors the safety of annualised payouts (and also the benefit of zero tax if certain thresholds such as dividend income of Rs 10 lakh are not crossed), irrespective of the volatility in price movements of the underlying stock," says Siddharth Purohit, Senior Equity Research Analyst, Angel Broking.

In the coming days, with lower interest rates consumption is increased. This in turn improves corporate credit offtake.

"Considering all this, the equity market is positioned reasonably well to deliver above average growth. Hence, investing in dividend yielding stocks makes sense from the risk-averse investor's perspective," adds Rohira.

Companies that pay ouy high dividends are known to be less risky and offer consistent growth along with logging large cash in their books.

On the back of such strong fundamentals, these stocks are likely to fall less than growth stocks during a market fall as these companies avoid cutting dividends since it sends a negative signal to the stock markets.

"If there is uncertainty on the earnings trajectory and general macro or micro economic indicators are weak, these high dividend paying companies offer solace to investors," adds Purohit.

Here are the top 5 stocks that may ensure good returns:

Birla Sun Life Dividend Yield Plus Fund

Launched in the year 2003, this mutual fund scheme has recorded a turnover of 69 per cent with a 21.01 per cent return since launch. The fund requires a minimum  investment of Rs 1,000 only.

The fund has a Rs 169.59 growth and Rs 17.28 dividend rate. As on April 30, 2017 the assets stand at Rs 1,108 crore.

According to Value Research, this fund has a one year return of 32 per cent and the scheme is ranked 3 in Diversified Equity category by Crisil for the quarter ended Mar 2017.

BNP Paribas Dividend Yield Fund

A four star valued fund according to Value Research, this mutual fund scheme has a projection of 26.17 per cent return in one year with assets to the tune of Rs 332 crore as on Apr 30, 2017.

This mutual fund scheme requires a minimum investment of Rs 5,000 and Rs 500 for SIP investment.

HSBC Dividend Yield Equity Fund

The HSBC fund is an open-ended type fund in the S&P BSE 200 index. Managed by Gautam Bhupal and Amaresh Mishra the portfolio has 99.57 per cent equity allocation with majority holdings by ICICI Bank and ITC.

It is categorised under equity large caps and offer a 29.08 per cent return in one year, according to Value Research.

ICICI Prudential Dividend Yield Equity Fund

With a 94.48 per cent equity asset allocation, this fund has majority holdings by HCL Tech and ICICI Bank categorised under mid cap stocks.

The fund has assets worth Rs 199 crore as on April 30, 2017 and a 39.07 per cent return in one year as per Value Research data.

Principal Dividend Yield Fund

This scheme is categorized under multi-cap with a 98.49 per cent equity holding led by Hindustan Unilever, followed by State Bank of India.

This fund ensures a 37.3 per cent return in one year and a category return of 25 per cent.

The investment plan for this fund is a growth type listed in the Nifty 500 index with an asset size of Rs 114.68 crore.

It's wise to keep in mind a few factors before investing in these stocks:

Always look out for the company's growth projections and earnings momentum to ensure that your returns will be maintained.

Purohit advices investors to check the promoter shareholding pattern, as companies with larger promoter holding tend to reward investors with regular dividend payouts.