Dividend plan of mutual fund schemes has historically been investors’ favourite. Many investors choose this option in order to book profits as and when possible. But it’s common for mutual funds to fail and miss out dividends. In year 2017, average dividend yield delivered by funds in the industry would be ~10% and 15 funds missed giving dividends. In 2018, while the dividend yield was close to 9.90%, over 25 schemes didn’t announce dividends as promised. Notable point is dividend distribution is subject to availability of surplus in the fund.
Therefore, to understand how mutual fund schemes have performed, we studied dividend yields delivered by equity mutual fund schemes since 2016 and have a list of 10 best performing (highest dividend yield) and 10 worst performing – lowest dividend yield fund.
Best performing dividend option mutual fund schemes
|Taurus Largecap Equity Fund – Reg – Dividend||Large Cap Fund||73%||8%|
|JM Large Cap Fund – Half Yly Dividend||Large Cap Fund||46%||25%||10%|
|Indiabulls Blue Chip Fund – Dividend||Large Cap Fund||14%||11%||26%|
|Principal Emerging Bluechip Fund – Half Yly Dividend||Large & Mid Cap Fund||13%||35%|
|DSP Equity Fund – Reg – Dividend||Multi Cap Fund||11%||9%||26%|
|Reliance Vision – Dividend||Large & Mid Cap Fund||12%||11%||11%|
|Mirae Asset India Equity Fund – Reg – Dividend||Multi Cap Fund||16%||9%||18%|
|Invesco India Mid Cap Fund – Dividend||Mid Cap Fund||12%||10%||12%|
|SBI Magnum Equity ESG Fund – Dividend||Thematic||14%||6%||22%|
Large Cap funds have delivered highest dividends in last three years. Taurus Large Cap Equity Fund—Reg-Div has delivered highest dividends of almost 81% over a 3-year period. However, Taurus has not been a consistent dividend declaring fund. Among top 10, Principal Emerging Bluechip Fund-Half Yly Dividend is another fund that has not been consistent. It didn’t announce any dividend in 2018.
Worst performing dividend option mutual fund schemes
|Motilal Oswal Multicap 35 Fund – Reg – Dividend||Multi Cap Fund||1%||7%|
|UTI MNC Fund – Dividend||Thematic||4%||3%|
|Edelweiss Multi-Cap Fund – Reg – Dividend||Multi Cap Fund||7%|
|Baroda Large Cap Fund – Dividend||Large Cap Fund||6%|
|IDBI Midcap Fund – Reg – Dividend||Mid Cap Fund||6%|
|Kotak Infrastructure & Economic Reform Fund – Reg – Dividend||Thematic||3%||3%|
|SBI Bluechip Fund – Dividend||Large Cap Fund||5%|
|BNP Paribas Mid Cap Fund – Dividend||Mid Cap Fund||5%|
|UTI Infrastructure Fund – Dividend||Thematic||4%|
|BOI AXA Large & Mid Cap Equity Fund – Reg – Qtly Dividend||Large & Mid Cap Fund||1%|
Here are bottom 10 funds that disappointed investors in terms of paying out dividends. Even though past year was a difficult one for equities, such low dividend yields dilute the purpose of investing in dividend option. People look at dividends as regular source of income.
Dividend plans less attractive due to tax
Dividend option has become less attractive since government decided to levy taxes on the dividends declared from 2018 budget. For deriving fixed, regular income from your investments a better alternative to dividend would be Systematic Withdrawal Plan (SWP). This lets you withdraw a fixed amount or a fixed percentage amount per year. Please click here to read our previous article explaining & detailing difference between SWP & dividends.
Also read: Dividend Option Is Dead, Long Live Growth
We suggest investors to take a look at all available options before investing. If you are stuck with a fund not declaring dividends regularly it might be a good decision to switch to growth option and start SWP. Investors must evaluate scheme performance as well before switching plans or schemes.