dividend yielding fundsDividend 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

Scheme Name Type 2016 2017 2018
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

Scheme Name Type 2016 2017 2018
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.

Author
Priyanka Bharati

Priyanka Bharati is a senior personal finance analyst with RupeeIQ. She can be reached on priyanka.bharati@rupeeiq.com