Dividend Yield Funds: Invest for Regular Income

What is a Dividend Yield Fund?

A dividend yield fund is an equity mutual fund which invests primarily in stocks and securities of companies that have consistently paid dividends in the past. These funds aim to grow the portfolio with regular dividend income.

Advantages of Dividend Yield Funds

Attractive return potential

With dividend yield funds, you get portfolio growth through dividend additions and capital appreciation of the underlying securities.

Lower risk

Dividend-yielding stocks belong to stable companies which are consistently making profits. This lowers volatility risks.

Professional fund management

Benefit from expert fund management by professionals who can pick high dividend-yielding securities and manage them actively.

Potential for Regular Income Stream

These funds invest in companies with a history of consistent dividend payouts, offering investors the possibility of a regular income stream in addition to potential capital appreciation.

Dividend Yield Funds Returns Calculator

REGULAR INVESTMENT

SIP

Invest systematically in regular amounts and build a corpus with a disciplined investing habit.

ONE TIME INVESTMENT

Lump sum

Invest once with the facility of lump sum investing and save at your will. Time the market correctly and earn good returns.

INVEST AMOUNT

PERIOD

RETURNS

Total Amount Invested

₹ 0

after 30 years you will get a return of

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Disclaimer: Projections/estimations is backtested using historical data.

TARGETED RETURN VALUE

INVESTMENT PERIOD

RETURNS

Total Amount Invested

₹ 0

after 30 years you will get a return of

₹ 0

Disclaimer: Projections/estimations is backtested using historical data.

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Understanding Dividend Yield Funds

Table of Contents

What are Dividend Yield Funds?What are the features of Dividend Yield Funds?Things to keep in mind when investing in Dividend Yield Funds What should be the investment horizon for Dividend Yield Funds?What is the tax implication of Dividend Yield Funds?What are the payout options?

What are Dividend Yield Funds?

Dividend yield funds are a type of equity mutual fund wherein a minimum of 65% of the portfolio is invested in stocks and securities of companies that yield dividends. These funds, thus, offer good returns as dividends get added to the portfolio to boost its value.

What are the features of Dividend Yield Funds?

Lower volatility as the portfolio invests in profitable companies
Limited diversification in portfolio allocation
Suitable for investors with a long-term investment horizon of 7+ years
Invest through SIPs or lump sum
Earn tax-free returns up to ₹1 lakh if you stay invested

Things to keep in mind when investing in Dividend Yield Funds

There is a lower chance of capital appreciation as dividends are the main source of portfolio growth

Fund managers have limited choice of stocks with a good history of dividend payments

Stock selection is done by matching the dividend yield of securities against a benchmark index

The funds are suitable for new investors or those looking for stable equity returns

What should be the investment horizon for Dividend Yield Funds?

Dividend yield funds look for dividend income to grow the portfolio’s value
Since dividends are declared once or twice a year, short-term investment is not feasible
There’s also a short-term volatility risk as the underlying securities might not yield sufficient dividends.
A long-term investment horizon is recommended for growth and capital appreciation
A long-term horizon also helps earn attractive investment returns
You also get a tax benefit on staying invested for a longer tenure

What is the tax implication of Dividend Yield Funds?

Returns up to ₹1 lakh are tax-free if you stay invested for 12 or more months
Returns exceeding ₹1 lakh are taxed at 10%
For redemption within 12 months, returns are taxed at 15%
Dividends earned, if any, are taxed at your income tax slab rate

What are the payout options?

Dividend option

Earn dividends on your investment at regular intervals
Growth option

Accumulate the returns over the investment tenure and get a lump sum amount on redemption

FAQs On Dividend Yield Funds

Yes, dividend yield funds can be suitable for long-term investors seeking regular income and potential capital appreciation.

The minimum investment amount varies among funds. It can start from ₹100 for a SIP and ₹1000 for a lump sum investment and go up depending on the mutual fund house you choose.

Yes, you can invest in dividend yield funds through SIP (Systematic Investment Plan). SIPs allow you to invest systematically, in affordable amounts and build up a good corpus.

If you choose the dividend payout option, you can get regular income through dividends paid by the dividend yield fund.

Dividend yield funds typically invest in companies with a history of paying dividends, often from sectors like utilities, consumer goods, and financials.