Top Monthly Dividend Funds in India – High Yield Payouts
For investors seeking steady income and growth, dividend mutual funds are an excellent choice. A common question often arises: Do mutual funds give dividends? The answer is yes—mutual fund gives dividend payouts by investing in companies with a strong track record of sharing profits with their shareholders. By focusing on such stocks, dividend mutual funds provide a balanced approach to generating consistent income and long-term growth. This article will explore what dividend funds are, their benefits, risks, and how to invest in them.
Best Dividend Mutual Funds in India Based on Absolute Returns – 1Y
| Fund Name | AUM (Rs. in cr.) | Expense Ratio (%) | Absolute Returns - 1Y (%) | NAV (Rs.) |
|---|---|---|---|---|
| LIC MF Dividend Yield Fund | 463.64 | 1.22 | 43 | 34 |
| UTI Dividend Yield Fund | 4203.16 | 1.39 | 37 | 194 |
| Templeton India Equity Income Fund | 2398.7 | 1.22 | 32 | 156 |
| ICICI Pru Dividend Yield Equity Fund | 4783.44 | 0.57 | 32 | 57 |
| Aditya Birla SL Dividend Yield Fund | 1536.5 | 1.42 | 31 | 517 |
| SBI Dividend Yield Fund | 9555.94 | 0.76 | 27 | 16 |
| HDFC Dividend Yield Fund | 6140.17 | 0.65 | 27 | 27 |
| Sundaram Dividend Yield Fund | 941.28 | 0.99 | 26 | 153 |
| Tata Dividend Yield Fund | 985.68 | 0.7 | 23.12 | 19.57 |
| Baroda BNP Paribas Dividend Yield Fund | 1039.79 | 0.43 | 0 | 9.68 |
Note: The data on the top monthly dividend paying mutual funds in India in the list is from 16th December 2024 and is derived from Tickertape Mutual Fund Screener.
🚀 Pro Tip: You can use Tickertape’s Stock Screener to research and evaluate stocks with over 200+ filters and parameters.
Overview of the Best Dividend Yield Mutual Funds
LIC MF Dividend Yield Fund
The LIC MF Dividend Yield Fund is a dividend-yield-oriented equity fund that focuses on investing in companies with a consistent track record of high dividend payouts, aiming to provide long-term capital appreciation and steady income.
As of 16th December 2024, the fund has Assets Under Management (AUM) of Rs. 463.64 cr., an expense ratio of 1.22%, and has delivered an absolute return of 43% over the past year. The Net Asset Value (NAV) of the fund is Rs. 34.
UTI Dividend Yield Fund
The UTI Dividend Yield Fund is designed to invest in high dividend-yielding stocks across market capitalisations, targeting capital growth and income generation.
As of 16th December 2024, the fund manages an AUM of Rs. 4,203.16 cr., has an expense ratio of 1.39%, and has achieved an absolute return of 37% over the last year. The NAV of the fund stands at Rs. 194.
Templeton India Equity Income Fund
The Templeton India Equity Income Fund aims to provide long-term capital growth and income by investing in high-dividend-yielding equity and equity-related securities across domestic and international markets.
As of 16th December 2024, the fund’s AUM totals Rs. 2,398.70 cr., its expense ratio is 1.22%, and it has generated an absolute return of 32% over the past year. The fund’s NAV is Rs. 156.
ICICI Prudential Dividend Yield Equity Fund
The ICICI Prudential Dividend Yield Equity Fund focuses on investing in companies with high dividend yields and robust growth potential, aiming for consistent income and long-term wealth creation.
As of 16th December 2024, the fund has an AUM of Rs. 4,783.44 cr., an expense ratio of 0.57%, and has provided an absolute return of 32% in the past year. The NAV of the fund is Rs. 57.
Aditya Birla Sun Life Dividend Yield Fund
The Aditya Birla Sun Life Dividend Yield Fund invests primarily in dividend-paying companies, aiming to provide a combination of regular income and capital appreciation.
As of 16th December 2024, the fund’s AUM stands at Rs. 1,536.50 cr., with an expense ratio of 1.42%. It has delivered an absolute return of 31% over the last year. The fund’s NAV is Rs. 517.
SBI Dividend Yield Fund
The SBI Dividend Yield Fund seeks to achieve long-term capital growth by investing in companies with a high dividend yield, focusing on steady income and growth.
As of 16th December 2024, the fund manages an AUM of Rs. 9,555.94 cr., has an expense ratio of 0.76%, and has recorded an absolute return of 27% over the past year. The NAV of the fund is Rs. 16.
HDFC Dividend Yield Fund
The HDFC Dividend Yield Fund primarily invests in companies with consistent dividend payments, aiming to provide investors with a mix of income and capital appreciation.
As of 16th December 2024, the fund’s AUM totals Rs. 6,140.17 cr., its expense ratio is 0.65%, and it has achieved an absolute return of 27% over the past year. The NAV of the fund stands at Rs. 27.
Sundaram Dividend Yield Fund
The Sundaram Dividend Yield Fund targets investments in high-dividend-paying stocks across sectors, providing long-term wealth creation and regular income opportunities.
As of 16th December 2024, the fund has an AUM of Rs. 941.28 cr., an expense ratio of 0.99%, and has delivered an absolute return of 26% over the last year. The NAV of the fund is Rs. 153.
Tata Dividend Yield Fund
The Tata Dividend Yield Fund focuses on investing in dividend-yielding companies, aiming for consistent income and growth.
As of 16th December 2024, the fund manages an AUM of Rs. 985.68 cr., has an expense ratio of 0.70%, and has recorded an absolute return of 23.12% over the past year. The NAV of the fund is Rs. 19.57.
Baroda BNP Paribas Dividend Yield Fund
The Baroda BNP Paribas Dividend Yield Fund is a newly launched fund that seeks to generate long-term capital growth by investing in high-dividend-yielding companies.
As of 16th December 2024, the fund’s AUM stands at Rs. 1,039.79 cr., with an expense ratio of 0.43%. It has not recorded returns yet. The NAV of the fund is Rs. 9.68.
What are Dividend Yield Funds?
Dividend yield mutual funds are investment funds that focus on picking companies that can pay regular dividends to their shareholders. These funds target companies or assets that distribute a portion of their earnings to investors as dividends. So, by investing in these funds, you’re looking to gain from both the investments’ value growth and a steady flow of dividends. It’s like getting the best of both worlds – potential for growth and consistent earnings.
How Do Dividend Mutual Funds Work?
A high dividend mutual fund often invests in equities that can pay high dividends. This strategy offers investors a steady income stream and the potential for capital appreciation. The funds’ managers actively select dividend stocks, aiming to strike a balance between consistent payouts and the potential for growth.
In a nutshell:
- The fund manager selects stocks that have a history of paying dividends and are likely to continue to do so in the future.
- The frequency of dividend payments can vary from fund to fund. However, mostly the best dividend mutual funds pay dividends quarterly.
- The dividends that high dividend paying mutual funds pay can also vary.
Types of Dividends in Mutual Funds
Mutual funds distribute income to investors through dividends and other payouts derived from the earnings of their portfolio holdings. These earnings come from dividends paid by stocks and interest from bonds in the fund. Understanding the types of dividends in mutual funds helps investors choose funds that align with their financial goals. Here’s a look at the main types:
- Regular Dividends: Regular dividend paying mutual funds are periodic payouts, often made quarterly or annually, based on the income earned from the fund’s holdings. Regular dividends provide consistent income, making them ideal for investors seeking steady cash flow.
- Special Dividends: These one-time distributions occur during periods of strong fund performance or when there is excess cash. Special dividends are typically larger than regular ones and signal robust earnings.
- Capital Gain Distributions: When a fund manager sells securities in the portfolio at a profit, the gains are distributed to investors, usually at the end of the financial year. While not technically dividends, they provide additional income and may be subject to taxation.
- Reinvestment Option: Investors can reinvest dividends to buy more units of the mutual fund instead of taking cash payouts. This option supports compounding and helps build wealth over the long term.
How to Invest in Dividend Funds?
Investing in a dividend yield mutual fund through a mutual fund account is a straightforward process that can be accomplished by following these steps:
Step 1: Access your MF account platform by logging in.
Note: If you don’t have an existing account, you can quickly open a demat account by providing the necessary documentation and details.
Step 2: Identify the best dividend paying mutual funds that aligns with your financial objectives and risk tolerance. During this phase, you can consider the following factors:
- Search for the specific fund you wish to invest in.
- Evaluate the fund’s historical performance, tax implications, and more. This can help you create a better understanding of the chosen fund.
- Assess the fund’s risk level, ratings, and expense ratio. This can help you make more informed decisions about which funds are the best fit for your investment goals and risk tolerance.
Step 3: After you have selected the dividend yield fund(s) you want to invest in, access your account and navigate to the Mutual Funds section. Next, make the following decisions:
- Choose whether to invest through a Systematic Investment Plan (SIP) or make a one-time investment.
- If you choose to invest via SIP, determine your monthly SIP date, input the desired investment amount, and select the preferred payment method.
The key is to thoroughly research and evaluate the dividend yield mutual fund before investing, taking into account factors like performance, risk, and costs. This will help you make an informed decision aligned with your financial goals and risk tolerance.
Features of Dividend Yield Mutual Funds
Here are some of the key features of the best dividend mutual funds India:
- Asset Allocation: As per SEBI regulations, these funds are required to allocate a minimum of 65% of their assets in equity and equity-related instruments. This makes them a popular choice for investors seeking exposure to equity dividend opportunities.
- Investment Corpus: The best monthly dividend paying mutual funds India primarily allocate most of their funds into stocks that yield dividends. Companies owning these stocks consistently deliver higher-than-average profits, making these funds reliable options for steady returns.
- Risk-Reward Ratio: The primary focus of the highest yielding mutual funds lies in the stock market, making their performance sensitive to market ups and downs. However, compared to other equity-related schemes, dividend funds in India are relatively less volatile. As always, consulting a professional is recommended before investing in options like the best IDCW mutual fund or other dividends on mutual funds.
Advantages of Investing in Dividend Funds in India
Let’s explore the advantages of investing in the best mutual fund dividends:
- Equity Exposure with Lower Risk: The highest dividend paying mutual funds are less impacted by market volatility than other equity-oriented schemes. Investors looking for lower-risk equity exposure can consider these funds, including monthly dividend paying ETF in India, for their portfolio.
- High Return Potential: Funds like dividend yield fund direct growth or other monthly dividend mutual funds India invest in financially robust companies. Over time, these funds have the potential to generate high returns, making them a lucrative option for long-term investors.
- Steady Income: The best dividend paying mutual funds in India provide regular income through consistent dividend payouts. For investors asking, “Does mutual fund give dividend?”, the answer is yes—these funds are designed to ensure a steady stream of income.
Returns on Dividend Yield Mutual Funds & How to Calculate It?
Dividend Yield Mutual Funds are a popular choice among investors seeking regular income from their investments. These high dividend mutual funds primarily invest in dividend-paying stocks, making them an attractive option for income-oriented investors. Here’s an insight into the returns you can expect from these funds and how to calculate them:
Calculating Dividend Yield
To calculate the dividend yield, use the formula:
Dividend Yield (%) = (Annual Dividend Per Share / Current Market Price) x 100
Where,
- Annual Dividend Per Share is the sum of all dividends received over a year.
- Current Market Price is the prevailing market price of the mutual fund.
Let’s take an example to understand this better.
Assume the annual dividend per share for a particular mutual fund is Rs. 5 and the current market price of the fund’s units is Rs. 100.
Now, let’s apply the above-mentioned formula:
Dividend Yield (%) = (Annual Dividend Per Share / Current Market Price) x 100
Dividend Yield (%) = (Rs. 5 / Rs. 100) x 100
= 0.05 x 100
= 5%
In this example, the dividend yield of the mutual fund is 5%. This means that for every Rs. 100 invested in the fund, you receive Rs. 5 as an annual dividend, which translates to a 5% return based on the current market price of the share.
However, it’s important to note that the returns may vary depending on the fund’s underlying assets and market conditions.
Who Should Invest in Dividend Yield Mutual Funds?
Dividend mutual funds can be suitable for investors who prioritise regular income alongside potential capital appreciation. It can also be considered appropriate for those seeking equity exposure with a moderated level of risk.
Additionally, dividend mutual funds can also be an excellent option for low-risk appetite investors entering the equity market. The risk of dividend yield is potentially lower than any other equity mutual fund scheme, which makes them low-risk funds that are notably more stable and can navigate through market volatility.
Risks of Investing in Dividend Mutual Funds
When searching for top dividend yield mutual funds, consider these potential risks:
- Higher Taxes: Dividends received from dividend payout mutual funds are taxed as per the investor’s income tax slab, unlike growth-oriented funds where taxes are deferred until redemption. This can reduce the overall post-tax returns for investors in higher tax brackets.
- Returns Vary Based on Performance: While these funds, including some of the best dividend yield funds, are relatively less volatile due to their underlying investments, returns remain subject to market fluctuations and aren’t guaranteed.
- Inherit Mutual Fund Risk: Market risk, credit risk, interest rate risk, liquidity risk, and concentration risk are all potential pitfalls that can impact the performance and returns of a mutual fund. Whether you’re considering dividend yielding mutual funds or high yield mutual funds, it’s important to carefully analyze these risks before investing.
Taxation on Dividends as per the Union Budget for 2024-25
The Union Budget 2024-25 has changed how dividends from mutual funds are taxed. Investors interested in the highest dividend paying stocks can find it helpful to learn about these changes that include:
- Tax Deducted at Source (TDS): The 20% TDS on the repurchase of mutual fund units has been removed. This means investors will get the full amount at redemption. However, they must calculate and pay the correct capital gains tax when filing their income tax returns.
- Dividend Income: Dividends from mutual funds are now taxed according to the investor’s income tax slab rate. This shift moves the tax burden from mutual fund companies to individual investors.
- Foreign Dividends: Dividends from foreign mutual funds or companies are taxable in India. Investors can be taxed at a flat rate of 20% or their income tax slab rate. If taxes are paid in the foreign country, relief may be available under double taxation agreements.
These changes mean investors can receive dividend income without TDS but must report it correctly in their tax filings and pay taxes according to their slab rates. While this simplifies cash flow, it requires careful tax planning.
Factors to Consider While Investing in Dividend Yield Mutual Funds
To discover the best dividend yield fund or explore which mutual fund is best for monthly dividend, you can prioritise the factors below:
- Risk Tolerance: Conservative investors who prioritize portfolio stability may want to consider funds with a higher allocation to large-cap equities. For example, dividend funds in India with a focus on stability can align well with such goals. The primary aim here is to reduce risk while ensuring steady returns through monthly dividend payout mutual funds or other reliable options.
- Investment Tenure: Like other mutual funds, it’s crucial to review the time period for which the fund has been existing. A dividend yield fund NAV today that has weathered both bull and bear markets can potentially offer more consistent returns. Newly launched funds might boast impressive short-term results but may lack a proven track record. For instance, checking the latest dividend declared by mutual funds of India can provide insights into consistent performers.
To Wrap It Up…
Dividend mutual funds can be a good option for investors who are looking for regular income and tax benefits. However, it is important to choose a fund that is right for your investment goals and risk tolerance. While it may provide substantial returns during bullish periods, the returns can experience a significant decline in bearish market conditions. Therefore, it is advisable to do your own research and/or consult a financial advisor before investing.
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Frequently Asked Questions(FAQs) on Dividend Mutual Funds
Based on absolute 1-yr return, here are the top 5 dividend mutual funds in India for 2024:
(a) LIC MF Dividend Yield Fund
(b) UTI Dividend Yield Fund
(c) ICICI Pru Dividend Yield Equity Fund
(d) Templeton India Equity Income Fund
(e) Aditya Birla SL Dividend Yield Fund
Note: This list is for educational purposes and is not recommendatory.
Mutual fund companies have the discretion to distribute dividends to investors. They may sometimes pay out dividends even if the fund’s portfolio hasn’t generated any profits. When a mutual fund pays a dividend, the fund’s net asset value (NAV) is reduced by the same amount.
Investing in dividend yield funds can be a good option for investors who are looking for a regular source of income. These funds can also be suitable for investors who want to invest in equity but are looking for low-volatility. However, aggressive growth-seekers should approach it with caution.
Dividend refers to the total amount of money a company pays out to its shareholders as dividends. On the other hand, dividend yield is the percentage of the stock price that a company returns to its shareholders.
Yes, it is possible. While dividend reinvestment can potentially increase the number of shares an investor owns, the final outcome is heavily dependent on the fund manager’s discretion and the specific guidelines of the fund type.
