Best Dividend Paying Mutual Funds to Invest in India 2024
Dividend mutual funds offer a smart way to potentially grow your money while enjoying periodic payouts. These funds primarily invest in stocks or other income-generating securities, aiming to distribute a portion of their earnings as dividends to investors. Curious about how MF dividend works, the best dividend paying mutual funds, and whether they’re the right fit for your financial goals? Let’s dive in and explore the exciting realm of dividend investing!
What are Dividend Yield Mutual Funds?
Dividend Yield Mutual Funds are investment funds that focus on picking stocks or assets that pay out regular dividends. 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
The latest mutual fund dividends are categorized based on the extent of their investment in stocks. If a fund invests more than 65% in stocks, it’s labeled as a dividend-yielding equity fund. Otherwise, it’s categorized as a dividend-yielding debt fund.
List of Latest Dividend Mutual Funds in India
Looking to invest in mutual funds while earning a little extra on the side? Here’s a list of the latest regular dividend paying mutual funds in India. These funds can offer you a way to potentially grow your investments while also receiving periodic dividends. Let’s explore the options and find the ones that suit your financial goals and preferences.
You can also learn more about the 10 Highest Dividend Paying Stocks in India 2024 here:
| Fund Name | 1-Year Returns | Fund Size (in Cr) | Minimum Investment |
|---|---|---|---|
| ICICI Prudential Dividend Yield Equity Fund | 49.9% | ₹3,210.49 | ₹5000 |
| Aditya Birla SL Dividend Yield Fund | 51.1% | ₹1026.87 | ₹1000 |
| HDFC Dividend Yield Fund | 46.9% | ₹1610 | ₹5000 |
| Templeton India Equity Income Fund | 42.9% | ₹1.885.55 | ₹5000 |
| LIC MFDividend Yield Fund | 47.1% | ₹103.88 | ₹5000 |
| Sundaram Dividend Yield Fund | 42.5% | ₹726.83 | ₹5000 |
| IDBI Dividend Yield Fund | 20.5% | ₹103.88 | ₹100 |
| UTI Dividend Yield Fund | 38.4% | ₹3,518.42 | ₹5000 |
| Tata Dividend Yield Fund | 43.8% | ₹748.91 | ₹5000 |
| SBI Dividend Yield Fund | NA | ₹6,164.49 | ₹5000 |
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: The data on the top monthly dividend paying mutual funds in India in the list is from 23rd January 2024. However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!
Overview of the Best Dividend Yield Mutual Funds
Here is a brief overview of the best dividend yield mutual funds in India in 2024:
1. ICICI Prudential Dividend Yield
ICICI Prudential Dividend Yield Equity Fund aims for medium to long-term capital gains and dividends by primarily investing in a diversified portfolio of dividend-yielding companies’ equity instruments. It’s important to note that achieving the fund’s objective is not guaranteed. It can be considered one of the best dividend paying mutual funds in India.
2. Aditya Birla SL Dividend Yield Fund
Aditya Birla Sun Life Dividend Yield Fund, an open-ended equity scheme, predominantly invests in dividend-yielding stocks. The scheme aims to deliver capital growth and income by primarily investing in a well-diversified portfolio of companies with a relatively high dividend yield, making it one of the best monthly dividend paying mutual funds India.
3. HDFC Dividend Yield Fund
The HDFC Dividend Yield Fund falls within HDFC Mutual Funds’ Equity category. To invest, a minimum of ₹100 is needed for lump sum and SIP investments in the fund. It is one of the best monthly dividend mutual funds.
4. Templeton India Equity Income Fund
Over the last three years, the Templeton India Equity Income Fund yielded an annualized return of 28.73%, with a 23.67% return over the past five years. Categorized under Equity in Franklin Templeton Mutual Funds, the fund necessitates a minimum investment of ₹5,000 for lump sum and ₹500 for SIP. It is also one of the best monthly dividend mutual funds India.
5. LIC MFDividend Yield Fund
The LIC MF Dividend Yield Fund falls within LIC Mutual Funds’ Equity category. To invest in the LIC MF Dividend Yield Fund, a minimum lump sum investment of ₹5,000 or a minimum SIP investment of ₹500 is required.
6. Sundaram Dividend Yield Fund
Over the last three years, the Sundaram Dividend Yield Fund yielded annualized returns of 22.49%, with a 20.13% return over the past five years. Categorized under Sundaram Mutual Funds’ Equity division, the fund allows investments in lump sum starting from ₹5,000 and through SIP starting from ₹500.
7. IDBI Dividend Yield Fund
IDBI Mutual Funds categorize the IDBI Dividend Yield Fund under Equity. To invest in this fund, a minimum of ₹5,000 for lump sum and ₹500 for SIP is required.
8. UTI Dividend Yield Fund
Over the last three years, the UTI Dividend Yield Fund delivered a robust 21.97% annualized return, and in the past five years, it achieved an impressive 18.35% return. Categorized under Equity in UTI Mutual Funds, the fund requires a minimum investment of ₹5,000 for lump sum and ₹500 for SIP. It is also one of the best dividend mutual funds India.
9. Tata Dividend Yield Fund
Over the last three years, the Tata Dividend Yield Fund Direct Growth delivered a solid 9.08% annualized return, and an impressive 16.72% over the past five years. This fund, categorized under Equity in Tata Mutual Funds, allows investments with a minimum of ₹5,000 lump sum or ₹100 through SIP. It is one of the best daily dividend paying mutual funds in India.
10. SBI Dividend Yield Fund
The SBI Dividend Yield Fund, part of SBI Mutual Funds’ Equity category, requires a minimum investment of ₹5,000 for lump sum and ₹500 for SIP.
What are the Features of Dividend Yield Mutual Funds?
Dividend Yield Mutual Funds, often referred to as monthly dividend mutual funds, showcase a distinctive investment approach centered around stocks with strong dividend potential. Here are its features.
- Asset Allocation: As per SEBI regulations, these funds are required to allocate a minimum of 65% of their assets in monthly dividend stocks India that provide dividends.
- Investment Corpus: These funds primarily allocate most of their funds into stocks that yield dividends, indicating that the companies owning these stocks consistently provide higher-than-average profits.
- Risk-Reward Ratio: Primary focus of top monthly dividend payout mutual funds lies in the stock market, making their performance sensitive to market ups and downs. Nonetheless, these funds tend to be more stable than other equity-oriented options.
Factors to Consider While Investing in Dividend Yield Mutual Funds
To discover top dividend yield mutual funds, prioritize factors:
- Stability-Oriented Investors: Seek higher allocation to large-cap equities for reduced risk.
- Investment Tenure: Longer tenured funds tend to offer more consistent returns, especially across market cycles. Consider both tenure and performance history for long-term benefits.
How Do Dividend Mutual Funds Work?
High Dividend mutual funds function by pooling money from various investors to invest in a diversified portfolio of dividend-paying stocks. These funds target companies known for distributing a portion of their profits as dividends to shareholders. As these firms generate earnings, they pay dividends, which the mutual funds collect and distribute among their investors. 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 that are likely to continue to pay dividends in the future.
- The fund then distributes the dividends that it receives from the stocks to its investors.
- The frequency of dividend payments can vary from fund to fund. However, mostly the best dividend mutual funds pay dividends quarterly.
- The amount of dividends that a dividend MFs pays can also vary.
Who Should Invest in Dividend Yield Mutual Funds?
Dividend mutual funds are well-suited for investors who prioritize regular income alongside potential capital appreciation. Accordingly, investors have the opportunity to leverage dividends by directing their savings towards the best and good dividend paying mutual funds India. As a result, these upcoming dividends in mutual funds are considered appropriate for those seeking equity exposure with a moderated level of risk.
These dividend mutual funds are ideal for novice investors entering the equity market. This is because the companies they invest in are notably more stable and can navigate through market volatility. Even when the market experiences downturns, the companies underlying dividend yield funds typically offer consistent dividend payouts, enhancing their attractiveness.
How to Invest in Dividend MFs?
Investing in a dividend yield Mutual Fund through your account is a straightforward process that can be accomplished by following these uncomplicated steps:
Step 1: Access your MF account platform by logging in.
Note: If you don’t have an existing account, you can quickly establish a demat account by providing the necessary documentation.
Step 2: Identify a dividend yield fund that aligns with your financial objectives and risk tolerance. During this phase, consider the following factors:
- Search for the specific fund you wish to invest in.
- Evaluate the fund’s historical performance, tax implications, as well as the sectors and companies it invests in. You can also use the calculator to estimate potential returns.
- Assess the fund’s risk level, ratings, and expense ratio.
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 you want to invest through a Systematic Investment Plan (SIP) or make a one-time investment.
- Determine your monthly SIP date, input the desired investment amount, and select the preferred payment method.
Risks of Investing in Dividend Mutual Funds
When searching for top dividend yield mutual funds, consider these key risks:
- Mutual funds, including dividend yield funds, come with inherent risks like liquidity, credit, market, and concentration risks.
- Changes in government tax policies can impact the tax on dividend income, potentially increasing the tax burden.
- While these funds are relatively less volatile due to their underlying investments, returns remain subject to market fluctuations and aren’t guaranteed.
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 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:
Understanding Dividend Yield
The return from a Dividend Yield Mutual Fund consists of two components: capital appreciation and dividends received. The capital appreciation occurs when the fund’s Net Asset Value (NAV) increases. The second component is the dividends distributed by the underlying stocks held by the fund.
Calculating Dividend Yield
To calculate the dividend yield, use the formula:
Dividend Yield (%) = (Annual Dividend Per Share / Current Market Price) x 100
- 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.
Returns from Dividend Funds
The returns from good Dividend Yield Mutual Funds can be substantial, making them an attractive option for income-seeking investors. These returns come in the form of regular dividend payouts and potential capital appreciation. It’s important to note that the returns may vary depending on the fund’s underlying assets and market conditions.
Factors Affecting Returns
Returns from these funds are influenced by factors like dividend policies of the underlying companies, stock market performance, and the fund manager’s investment decisions. Diversified portfolios and careful stock selection can enhance returns while managing risks.
Advantages of Investing in MF Dividends
Investing in mutual funds that focus on dividends comes with several advantages. Let’s have a look at what best dividend in mutual funds producing mutual funds can offer:
- Steady Income: These funds often provide a steady stream of income through regular dividend payouts, making them appealing to investors seeking consistent returns.
- Safe Investment: They tend to invest in stable and established companies, which can offer a level of security in uncertain market conditions.
- Tax benefits: Dividends are taxed at a lower rate than capital gains. This means that you will keep more of your money if you invest in the best dividend paying mf.
- Diversification: Mutual funds that pay the highest dividends provide diversification by holding a variety of the mutual funds with best dividends, reducing the risk associated with putting all your eggs in one basket.
Tax Benefits on the Best Dividend Funds
The dividend from mutual fund taxability benefits depend on the type of fund and the holding period.
- Equity funds: Dividends received from equity funds are taxable in the hands of the investor. The tax rate depends on the investor’s income tax slab.
- For investors in the lowest income tax slab (up to ₹2.5 lakhs), the tax rate is 0%.
- For investors in the highest income tax slab (above ₹10 lakhs), the tax rate is 30%.
- Debt Funds: Dividends received from debt funds are taxable in the hands of the investor. The tax rate is 20%, without indexation benefits.
- Liquid Funds: Dividends received from liquid funds are taxable in the hands of the investor. The tax rate is 20%, with indexation benefits.
- ELSS Funds: ELSS funds are a type of equity fund that offers tax benefits under Section 80C of the Income Tax Act. The first ₹1.5 lakh invested in ELSS funds is eligible for a deduction from taxable income. Dividends received from ELSS funds are taxable in the hands of the investor, but the tax paid is credited against the investor’s income tax liability.
In addition to the above, dividends received in excess of ₹5,000 from a mutual fund are subject to tax deduction at source (TDS) at 10%.
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.
You can read about the Bear vs Bull market here.
Finally, to make a sound decision, looking at the best dividend-paying mutual funds would be wise.
FAQs
Dividend mutual funds typically pay dividends quarterly, but some may be mutual funds that give monthly dividends or annually.
No, there is no lock-in period for regular highest dividend paying mutual funds. However, ELSS funds, a category of equity mutual funds that provide tax advantages under Section 80C of the Income Tax Act, do have a mandatory lock-in period of 3 years.
Here are some of the top dividend paying mutual funds in India:
1. HDFC Dividend Yield Fund
2. UTI Dividend Yield Fund
3. Templeton India Equity Income Fund
Note- This is an educational list and is not meant to be recommendatory.
Dividend Yield funds in India can provide regular income and moderate returns, making them a good option for investors with a medium-term investment horizon.
Reinvestment is possible, yet the fund manager’s discretion and fund type guidelines play a crucial role.
Dividend yield funds typically invest 70-80% of their assets in stocks with higher yields than the market, aiding fund managers in stock selection.
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