Tata Dividend Yield Fund – Should you Invest in this NFO?

Tata Dividend Yield Fund – Should you Invest in this New Fund OfferTata Dividend Yield Fund NFO Review

Tata has launched Dividend Yield Fund that opened for subscription on 3rd May, 2021. Tata Dividend Yield Fund invests predominantly in dividend yielding stocks and aims to provide capital appreciation and regular income. Dividend Yield Funds have provided 3% to 16% annualised returns in the last 5 years. Should you invest in the Tata Dividend Yield Fund NFO? What are the risk factors an investor should consider before investing in such funds?

Also Read: Axis Global Innovation Fund- Underlying fund generated 33% returns in last 2+ years

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.

NFO issue details of Tata Dividend Yield Fund NFO

Tata Dividend Yield Fund NFO would open for subscription on Monday, 3rd  May, 2021 and closes on Monday, 17th Monday, 2021. Here are the NFO issue details.

Scheme Opens 03-May-21
Scheme Closes 17-May-21
Scheme reopens for continuous purchase/sale Within 5 days after allotment
Minimum Lumpsum Rs 5,000
Minimum SIP Rs 1,000 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load For < 1 year – For 12% of investment: Nil
For remaining investment: 1%
For > 1 year – Nil
Risk Very High Risk
Max expense Ratio (TER) 2.25%
Benchmark Nifty Dividend Opportunities 50 TRI

Download Tata Dividend Yield Fund NFO SID

What is the investment objective of Tata Dividend Yield Fund?

The investment objective is to provide 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?

Here is the allocation pattern of this fund.

Type of instruments Min % Max % Risk Profile
Equity and equity related instruments of Dividend Yielding Companies 65% 100% High
Other Equity & Equity related Instruments 0% 35% High
Debt and Money Market instruments 0% 35% Low to Medium
Units issued by REITs & InvITs 0% 10% Medium to High

Why should you invest in Tata Dividend Yield Fund NFO?

Here are a few reasons to invest in such mutual fund schemes.

1) This fund invests in companies having a record of dividend payments. Consistent dividend paying companies can reward investors with regular income.

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.

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 yield fund invests in dividend yielding stocks. While they 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 up to 10%, which are high risk.

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

Performance of existing Dividend Yield Mutual Funds

Let us look at the performance of existing dividend yield funds in India. Returns more than 1 year are annualised. What you see in Table-1 (annualised returns) Vs Table-2 (simple yearly returns) would be completely different. These dividend yield funds would keep delivering good returns every 3 years (e.g. 2014, 2017 and then in 2020).

Fund Name 1 Year 3 Years 5 Years
Principal Dividend Yield Fund 49.1% 10.0% 16.5%
Templeton India Equity Income Fund 73.8% 10.1% 14.9%
UTI Dividend Yield Fund 49.5% 9.6% 13.2%
ICICI Prudential Dividend Yield Equity Fund 60.7% 3.4% 11.3%
Aditya Birla Sun Life Dividend Yield Fund 49.4% 5.0% 9.5%

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Should you invest in Tata Dividend Yield Fund NFO?

Tata Dividend Yield Fund is the new fund offer that invests in dividend yielding stocks. Such MFs pick up stocks majorly from the blue chip category which are considered relatively better investment options. If you observe, these funds keep delivering good returns at every 3rd year with underperformance in 1st and 2nd year. This category of funds has mixed performance and generated 3% to 16% annualised returns in the last 5 years. I would recommend avoiding such funds as of now. Alternatively, one can invest in largecap mutual funds or flexicap mutual funds that can deliver better returns.

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Suresh KP


  1. Hi

    I have been following your blog since 10 years and we have interacted many times in comments section. You are doing fabulous job and I keep reading your blog’s even now. Just wanted small help. Could you please give your views on Edelweiss US TECHNOLOGY EQUITY FOF. It was launched a year ago and is doing pretty well. It invests in us technology companies like Netflix, amazon, Tesla etc. Around 1100+ cr aum. Just wanted to know your views on this fund.

    1. This fund was launched over 1 year back. It has shown good performance in last 1 year and technology sector is ever green. If you are high risk investor, you can invest. Alternatively, instead of testing with such short tenure funds, you can even try for funds that performed well in medium to long term.

      On a lighter note, I am running this blog in the last 9 year and there is no way you can follow our blog for 10 years 🙂

      1. Thank you for prompt. I guess I miscalculated 1 year 🙂

        I am already holding motilal Oswal s&p 500, motilal Oswal Nasdaq 100 and icici us blue chip. Is it fine if I can add this fund- Edelweiss us technology as well? My exposure to international funds is 15% and can consider increasing a bit more since I am willing to take risk.

        1. No problem. Since you are holding other two international funds, this would be like duplicate. You can go and increase your portfolio in existing international funds.

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