Dividend yield funds offer 24.96% in three years; topper offers 33%

Dividend yield funds have offered an average return of around 24.96% in a three year horizon, an analysis of performance showed. Six dividend yield schemes have completed three years in the market. ICICI Prudential Dividend Yield Equity Fund gave the highest return of around 33.69% in the three-year horizon. Templeton India Equity Income Fund, second in the list, offered 27.67% in three years.


Aditya Birla Sun Life Dividend Yield Fund, the oldest scheme in the category, offered 26.30% in three years. The scheme has completed around 20.75 years in the market.


UTI Dividend Yield Fund and Templeton India Equity Income Fund have completed around 18.44 and 17.48 years in the market. UTI Dividend Yield Fund and Templeton India Equity Income Fund gave 21.53% and 27.44% respectively in three years.

Despite offering double-digit returns, two schemes - LIC MF Dividend Yield Fund, and UTI Dividend Yield Fund– underperformed their respective benchmarks in three years.

SBI Dividend Yield Fund, the largest scheme in the category, has not even completed one year. The scheme was launched in March this year. The scheme manages assets of Rs 5,256.49 crore. HDFC Dividend Yield Fund, the second largest scheme based on assets managed, has not completed three years in the market.

Four dividend yield funds have a performance record of 10 years and five schemes have a performance record of five years. Templeton India Equity Income Fund offered the highest return in five years. The scheme gave 17.59%, followed by ICICI Prudential Dividend Yield Equity Fund which gave 16.65%.

These funds are benchmarked against NIFTY 500 - TRI, and Nifty Dividend Opportunities 50 - TRI. These benchmarks gave 21.88% and 26.61% respectively. The benchmarks offered an average return of around 22.52% in a three year horizon.

Investors, especially those looking for safety in uncertain times, often look for companies that pay regular dividends to invest. Such investors also look at mutual funds that follow the strategy. The basic premise is that regular dividends add to the returns.

Dividend Yield Funds are the schemes that predominantly invest in dividend yielding stocks. These schemes have a minimum investment of 65% of total assets in equity. Dividend yield funds invest most of their equity portfolio into high dividend-yielding stocks. The returns they generate have a big dependence on the dividend distributed by the holding companies.

The above exercise is not a recommendation. One should not make any investment or redemption decisions based on this exercise. Past performance does not guarantee future performance.

One should always choose a scheme based on risk appetite, goal, and investment horizon. We considered regular and growth options.