MFs investing in high dividend-yield cos shine

COIMBATORE: Mutual funds that invested in high dividend yielding companies have weathered the roller coaster ride of stock markets much better in the last 12 months. They have also offered stable returns.

Three dividend yield MFs figure in the top-30 funds list in the last year (up to September 16), an analysis of the net asset values show. What's more these funds have beaten the benchmark indices by a handsome 10-15 % margin as they clocked gains of 31-46 %. In the same period, the 30-share sensex mustered gains of 24% while 50-share Nifty registered a 22% rise.

While the smart rebound has helped many MFs climb out of the bottom, most dividend yield funds - which invest in companies with strong cash flows - registered slower declines during the downturn enabling them to deliver strong returns in the past year. These funds were among those that declined the least falling 23.1% and 38.5% between September 15 last year and March 9, data from MF tracker Value Research shows. Sensex dropped a good 40% during this period.



"Value approach works better in a fall. Since we invested in companies with stable cash flows and strong balance sheets we were able to do well," says Ajay Argal, cohead , equity, Birla Sun Life MF. "By virtue of filter, (dividend yield) fund invests in companies where growth (prospects) is better. Value stocks have always done well in a downturn," says Swati Kulkarni, who manages UTI dividend yield fund.

The shift from mid-cap stocks to large-caps also helped the category to pare down losses when the markets tanked, say officials. Though dividend yield funds grew 80-109 % between March 9 and September 16 ��� when the broader indices including sensex more than doubled ��� industry officials point out that they have remained consistent in a highly volatile market.