Dividend Yield Mutual Funds

Dividend yield mutual funds are a type of equity mutual fund that invests in companies with a history of paying out high dividends. These funds aim to generate income for investors by investing in stocks that provide higher dividend yields compared to the average market level. The portfolio of dividend yield mutual funds typically includes established blue-chip companies, utilities, and realty firms.

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Best Dividend Yield Mutual Funds to Invest

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ICICI Prudential Asset Management Company LimitedHDFC Asset Management Co LtdSBI Funds Management LtdKotak Mahindra Asset Management Co LtdNippon Life India Asset Management LtdAditya Birla Sun Life AMC LtdAxis Asset Management Company LimitedUTI Asset Management Co LtdMirae Asset Investment Managers (India) Private LimitedDSP Asset Managers Private LimitedTata Asset Management LimitedBandhan Asset Management Company LimitedHSBC Asset Management(India)Private LtdDSP Investment Managers Private LimitedIDFC Asset Management Company LimitedFranklin Templeton Asst Mgmt(IND)Pvt LtdCanara Robeco Asset Management Co. Ltd.Edelweiss Asset Management LimitedQuant Money Managers LimitedInvesco Asset Management (India) Private LtdPPFAS Asset Management Pvt. LtdMirae Asset Mutual FundMotilal Oswal Asset Management Company Limited - Portfolio ManagersSundaram Asset Management Company LtdMirae Asset Global Inv (India) Pvt. LtdBaroda BNP Paribas Asset Management India Pvt. Ltd.Mahindra Manulife Investment Management Pvt. Ltd.LIC Mutual Fund Asset Management LimitedJM Financial Asset Management LimitedPGIM India Asset Management Private LimitedDaiwa Asset Mgmt. (India) Pvt. Ltd.Fund PineBridge Mutual FundUnion Asset Management Co. Pvt. Ltd.Baroda Asset Management India LimitedBajaj Finserv Asset Management LimitedPrincipal Asset Management Private LimitedWhiteOak Capital Asset Management Limited360 ONE Asset Management LimitedJPMorgan Asset Management India Pvt. LtdEdelweiss Mutual FundBank of India Investment Managers Private LimitedITI Asset Management LimitedNavi AMC LimitedNJ Asset Management Private LimitedICICI Prudential Asset Mgmt.Company LimitedFranklin Templeton Asset ManagementIDBI Asset Management LimitedQuantum Asset Management Co Pvt. Ltd.Samco Asset Management Pvt LtdHelios Capital Asset Management (India) Private LimitedGroww Asset Management Ltd.Trust Asset Management Private LimitedTaurus Asset Management Company LimitedShriram Asset Management Co LtdOld Bridge Asset Management Private LimitedZerodha Asset Management Private LimitedING Investment Mgnt (India) Private Ltd.Baroda BNP Paribas Mutual Fund
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How Does Dividend Yield Mutual Funds Work?

Dividend yield mutual funds pool investor money to buy stocks known for high dividends, typically from established companies in sectors like utilities or consumer staples. The fund distributes these collected dividends to investors, who can choose to reinvest them for compounding growth or receive them as cash for a regular income stream. While these funds prioritize income over stock price growth and are generally considered less risky, keep in mind the dividends are taxed and may underperform in bull markets.

Advantages of investing in Dividend Yield Mutual Funds

Dividend Yield Mutual Funds offer several advantages for investors

  • Regular income stream

    These funds distribute dividends from the companies they hold, providing investors with a predictable source of income. This can be appealing to retirees or those nearing retirement who rely on investment income.

  • Lower risk profile

    By focusing on established companies with a history of payouts, these funds are generally considered less risky than other equity funds. This is because mature companies are typically less volatile than growth-oriented companies.

  • Potential for capital appreciation

    While income is the priority, the underlying share prices of the companies within the fund can also appreciate over time, offering capital growth alongside the regular income stream.

  • Diversification

    Owning a single share of the fund provides exposure to a basket of dividend-paying stocks, reducing portfolio risk compared to investing in individual stocks.

Limitations of Investing in Dividend Yield Mutual Funds

Here are some limitations to consider when investing in dividend yield mutual funds:

  • Taxation of dividends

    Dividends are typically taxed as income, which can reduce your overall return, especially if you are in a high tax bracket.

  • Lower growth potential

    Since these funds focus on companies with a history of payouts, they may underperform in bull markets compared to growth-oriented funds that prioritize capital appreciation.

  • Limited capital appreciation

    The priority is on generating income, so capital appreciation of the fund's share price may be slower compared to other equity funds.

  • Expense ratios

    Like any mutual fund, dividend yield funds also have expense ratios that eat into your returns. These fees cover the fund's operational costs.

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