SBI Dividend Yield Fund NFO – Issue Details and Review

SBI Mutual Funds has launched Dividend Yield Fund NFO that would open for subscription on 20th February, 2023. SBI Dividend Yield Fund predominantly invests in dividend yielding stocks and aims to provide capital appreciation and regular income. Dividend Yield Funds have provided 9% to 14% annualized returns in the last 5 years. Should you invest in the SBI Dividend Yield Fund NFO? What are the risk factors an investor should consider before investing in such funds?

Also Read: 5 Star Rated Mutual funds from ValueResearch

What are Dividend Yield Funds?

As the name indicates, dividend yield funds invest in dividend yielding stocks. Their main motto is to provide capital appreciation by providing regular income.

SBI Dividend Yield Fund NFO – Review

SBI Dividend Yield Fund NFO – Issue Details

This is an open-ended mutual fund. Here are the NFO issue details.

Scheme Opens 20-Feb-23
Scheme Closes 06-Mar-23
Scheme reopens for continuous purchase/sale Within 5 working days
Minimum Lumpsum Rs 5,000
Minimum SIP Rs 500 for 12 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load 1% if redeemed in excess of 10% within 365 days
Risk Very High Risk
Benchmark NIFTY 500 TRI
Fund Manager Mr Rohit Shimpi
Mr.Mohit Jain
Max TER 2.25%

SBI Dividend Yield Fund SID Prospectus link

SBI Dividend Yield Fund NFO – Investment Objectives

The scheme seeks to provide investors with opportunities for capital appreciation and/or dividend distribution by investing predominantly in a well-diversified portfolio of equity and equity related instruments of dividend yielding companies.

However, there can be no assurance that the investment objective of the scheme will be achieved.

What is the allocation pattern in this mutual fund scheme?

Type of instruments Min % Max % Risk Profile
Equity and equity related instruments of
dividend yielding companies (including
equity derivatives)
65% 100% High
Other equity & equity related instruments 0% 35% High
Debt securities (including securitized
debt & debt derivatives) and money
market instruments
0% 35% Low to Medium
Units issued by REITs and InvITs 0% 10% Medium to High

Performance of existing Dividend Yield Mutual Funds

Let us look at the performance of existing dividend yield funds.

Scheme Name 3 Yrs 5 Yrs 10 Yrs
Templeton India Equity Income Fund 25.0% 14.0% 15.0%
Sundaram Dividend Yield Fund 17.0% 11.6% 14.0%
ICICI Prudential Dividend Yield Equity Fund 25.9% 11.6%
UTI Dividend Yield Fund 17.4% 11.3% 12.7%
Aditya Birla Sun Life Dividend Yield Fund 19.6% 9.7% 12.4%
IDBI Dividend Yield Fund 16.4%

Why should you invest in SBI Dividend Yield Fund NFO?

Here are a few reasons to invest in such schemes.

1) These funds provide better yield on investments as they invest majorly in blue chip funds that provide higher dividend yield.

2) The level of risk in such funds is relatively low as they invest majorly in large-cap stocks that has proven track record of paying dividends.

3) Dividend Yield Funds have generated 9% to 14% annualized returns in the last 5 years and 12% to 15% annualised returns in the last 10 years. This shows consistent performance in this category.

Major risk factors you should consider before investing in such funds

One should consider some of these risk factors / negative factors before investing.

1) Dividend funds invests in dividend yielding stocks. While such stocks might provide good dividends, the price appreciation of such stocks could be at a lower rate compared to other stocks.

2) It invests in debt instruments to the tune of 35% where there is interest rate risk, liquidity risk and default risks.

3) It invests in InvITS and REITs, which are high risk

4) Investors should read the NFO prospectus for complete risk factors.

Also Read: Stocks paying highest dividends along with increase in share price

Should you invest in SBI Dividend Yield Fund NFO?

SBI Dividend Yield Fund invests in dividend yield stocks. Such funds pick up stocks majorly from the blue chip category which are considered relatively safe investment options. This category of funds have provided 9% to 12% annualized returns in the last 5 years.

On the other side, there is no guarantee that such dividends would be paid by so called blue chip corporates. This category of funds has generated lower returns in the past compared to other equity funds (pre covid).

Moderate to high risk investors can invest in this fund. If you do not want to test with new funds, you can invest in some of the top performing dividend yield funds indicated above.

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Suresh KP

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