Top High Dividend Yield Mutual Funds in India for 2025
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 17th September 2025 and is derived from Tickertape Mutual Fund Screener.
- Plan: Growth
- Category: Dividend Yield Fund
- Absolute Returns – 1Y: Sorted from Highest to Lowest
🚀 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
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.
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.
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.
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.
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 to generate consistent income and create long-term wealth.
SBI Dividend Yield Fund
The SBI Dividend Yield Fund aims to achieve long-term capital growth by investing in companies with high dividend yields, focusing on steady income and growth.
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.
Sundaram Dividend Yield Fund
The Sundaram Dividend Yield Fund targets investments in high-dividend-paying stocks across various sectors, providing opportunities for long-term wealth creation and regular income.
Tata Dividend Yield Fund
The Tata Dividend Yield Fund focuses on investing in dividend-yielding companies, aiming for consistent income and growth.
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.
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?
You can easily invest in dividend yield mutual funds by following these steps:
- To invest in very dividend yield mutual funds, you can visit an equity investment platform such as smallcase or Tickertape.
- The next step would be to research and identify the top 10 dividend yield funds which aligns with your investment thesis. You can easily select and learn more about the best dividend yield funds with the help of a financial tool like the Tickertape Mutual Fund Screener. With over 50 pre-loaded filters, it helps you create a comprehensive list by providing insights into the fund’s performance. Try it now!
- Once you have selected the funds based on different metrics and parameters, go to smallcase.com or the smallcase app, and login via your phone number. Click on ‘Discover‘ and enter the name of the specific mutual fund name in the search bar and hit enter. To start SIP in mutual funds, you can click on ‘invest now’ and select whether you want to invest a lump sum amount or start a SIP and start investing!
However, if you’re confused about which stocks to pick, you can explore smallcases:
- smallcases are readymade model portfolios of stocks/ETFs, that are based on a theme idea or strategy
- They’re created and managed by SEBI-registered investment experts (also known as smallcase managers)
- smallcase offers over 500+ stock portfolios, created by 200+ managers
Here are a few popular smallcases among new investors:
Disclosures for aforementioned smallcases
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.
Benefits 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 a 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 in 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.
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 Dividend Yield Funds 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 which include:
Equity Mutual Funds
| Capital Gains Tax | Holding Period | Old Rate | New Rate |
| Short-Term Capital Gains (STCG) | Less than 12 months | 15% | 20% |
| Long-Term Capital Gains (LTCG) | More than 12 months | 10% | 12.50% |
- Tax-Free Limit: The capital gains up to ₹1.25 lakh per year are tax-free. This is an increase from the previous limit of ₹1 lakh.
- Tax Rate: The gains exceeding ₹1.25 lakh are now taxed at a flat rate of 12.5%. This is an increase from the previous rate of 10%.
- Indexation: It allows investors to adjust the purchase price for inflation. The government has removed the benefit of indexation for all asset classes, including equity mutual funds. The new rule imposes a flat 12.5% tax on all long-term capital gains but eliminates any indexation benefits.
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) Aditya Birla SL Dividend Yield Fund
(b) Franklin India Dividend Yield Fund
(c) Sundaram Dividend Yield Fund
(d) UTI Dividend Yield Fund
(e) HDFC Dividend Yield Fund
Note: This list is for educational purposes and is not recommended.
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.
