Investment in direct equity is riskier as we do not know which stock would perform well in medium to long term. If you are an investor looking to invest in equity with low volatility, you can opt for Dividend Yield Mutual Funds. These funds invest in stocks that are low volatile. As an example, when Nifty50 index generated 5.8% returns in last 1 year, dividend yield funds generated 8% to 21% returns. In this article, we would talk about some of the Best Dividend Yield Mutual Funds to invest in 2022 in India.
Also Read: Review of Mutual Funds that generated 14% returns in last 6 months
What are Dividend Yield Mutual Funds?
Companies share profits to their shareholders in the form of dividends. Dividend yield refers to dividends paid over the current market price of the shares. While not all companies pay dividends, some companies pay dividends consistently. Dividend yield mutual funds target to invest in companies that are expected to pay high and consistent dividends. Since such companies pay regular dividends, these would have a strong financial record and less volatile in nature.
Typically dividend yield mutual funds invest 70% to 80% in dividend paying companies and balance in other stocks.
Is Dividend Option in mutual fund same as Dividend Yield?
No. Every open ended mutual Funds would come with 2 options i.e. growth option and dividend option.
Growth option โ Fund would keep investing in stocks or debt instruments based on investment objective. The value of NAV grows based on an increase in the underlying asset value. Investors would get benefitted only on redemption.
Dividend option โ These funds would invest based on investment objective, however, pay regular dividends to investors. This is nothing to do with dividend declared by the companies where such fund invested. If the share prices of the underlying stocks grow, such funds can declare a dividend to investors.
While every fund would have growth and dividend option, Dividend Yield funds are a separate category of funds which aims to invest only in high or consistent dividend yield companies.
Who should invest in Dividend Yield Fund?
Investors who want to invest in equity, however looking for low volatility and invest in medium to long term can invest in these funds.
These are for moderate risk investors.
Aggressive investors can avoid such funds.
List of Best Dividend Yield Mutual Funds to invest in 2022
Here is the list of dividend yield funds for 2022 and their annualized returns in last 1 to 5 years.
| Mutual Fund Name | 1 Yr | 3 Yrs | 5 Yrs |
|---|---|---|---|
| Templeton India Equity Income Fund | 20% | 22% | 15% |
| Sundaram Dividend Yield Fund | 9% | 15% | 13% |
| UTI Dividend Yield Fund | 8% | 15% | 12% |
| ICICI Prudential Dividend Yield Equity Fund | 21% | 17% | 11% |
Top Dividend Yield Funds for 2022 โ Past Performance and Risk Metrics
Let us get into more info about these funds.
#1 – Templeton India Equity Income Fund
The MF seeks to provide a combination of regular income and long-term capital appreciation by investing primarily in stocks that have a current or potentially attractive dividend yield, by using a value strategy.
Performance and Risk Metrics
| Performance & Risk Metrics | Templeton India Equity Income Fund |
|---|---|
| 3 Years – SIP Returns | 32% |
| 5 Years – SIP Returns | 21% |
| 5 Years – Annualised Returns | 15% |
| AUM –ย Crores | 1,246 |
| Expense Ratio | 1.64% |
| Beta | 0.84 |
| Alpha | 7.92 |
Top 10 Holdings of the fund
- Power Grid
- Infosys
- TCS
- Embassy Office Parks REIT
- Brookfield India Real Estate REIT
- HUL
- ITC
- NHPC
- Bajaj Auto
- GAIL
This fund is outperforming and generated 15% annualized return since inception with such low volatile portfolio. It is one of the Best Dividend Yield Mutual Funds to invest in 2022.
#2 – Sundaram Dividend Yield Fund
The scheme aims to provide capital appreciation by investing predominantly in a well-diversified portfolio of companies that have a relatively high dividend yield.
Performance and Risk Metrics
| Performance & Risk Metrics | Sundaram Dividend Yield Fund |
|---|---|
| 3 Years – SIP Returns | 21% |
| 5 Years – SIP Returns | 15% |
| 5 Years – Annualised Returns | 13% |
| AUM –ย Crores | 267 |
| Expense Ratio | 1.98% |
| Beta | 0.83 |
| Alpha | 1.97 |
Top 10 Holdings of the fund
- Infosys
- Reliance
- TCS
- NTPC
- ICICI Bank
- HUL
- Tata Steel
- HDFC Bank
- ITC
- SBI
Even this fund is outperforming and generated 13.3% annualized return since inception with such low volatile portfolio.
#3 – UTI Dividend Yield Fund
The scheme seeks to generate long term capital appreciation and income by investing predominantly in dividend yielding equity and equity related securities.
Performance and Risk Metrics
| Performance & Risk Metrics | UTI Dividend Yield Fund |
|---|---|
| 3 Years – SIP Returns | 20% |
| 5 Years – SIP Returns | 15% |
| 5 Years – Annualised Returns | 12% |
| AUM –ย Crores | 2,917 |
| Expense Ratio | 1.24% |
| Beta | 0.80 |
| Alpha | 2.10 |
Top 10 Holdings of the fund
- Infosys
- ITC
- Tech Mahindra
- Mphasis
- NTPC
- TCS
- HUL
- Tata Steel
- L&T Infotech
- Marico
This fund has generated consistent returns in the last 5 to 7 years and generated 12.5% annualized return since inception. It is one of the Top Dividend Yield Funds to invest in India.
Also Read: Best Dividend Yield Stocks for 2022 (6% to 10% dividends)
#4 – ICICI Prudential Dividend Yield Equity Fund
The scheme seeks to provide medium to long term capital gains and dividend distribution by investing in a well diversified portfolio of predominantly equity and equity related instruments, which offer attractive dividend yield.
Performance and Risk Metrics
| Performance & Risk Metrics | ICICI Prudential Dividend Yield Equity Fund |
|---|---|
| 3 Years – SIP Returns | 30% |
| 5 Years – SIP Returns | 18% |
| 5 Years – Annualised Returns | 11% |
| AUM –ย Crores | 910 |
| Expense Ratio | 0.92% |
| Beta | 0.91 |
| Alpha | 2.78 |
Top 10 Holdings of the fund
- Infosys
- HCL Tech
- ICICI Bank
- L&T
- Axis Bank
- Sun Pharma
- M&M
- SBI Life
- Bharti Airtel
- ONGC
This mutual fund scheme is outperformer and generated 13.7% annualized returns since inception with such low volatile portfolio. It is one of the Best Dividend Yield Funds in 2022.
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I was really confused between dividend yield and dividend option. Thank you for this article. Really appreciate this.