Best Dividend Yield Mutual Funds in India 2024

Dividends are a part of a company's profits that are shared with the investors. A dividend yield fund is a type of mutual fund that mostly invests in companies with strong financials that can pay regular dividends to its shareholders. 

In this article, we will share an extensive list of the top 10 dividend yield funds in India in 2024. 

List of Dividend Yield Mutual Funds in India

Here is the list of top 10 Dividend Yield Mutual Funds in India in 2024.

ICICI Prudential Dividend Yield Equity Direct Plan – Growth

Fund Performance: The ICICI Prudential Dividend Yield Equity Fund has provided 29.26% annualized returns in the past 3 years and 28.97% in the past 5 years. The dividend fund comes under the Equity category of ICICI Prudential Mutual Funds. 

Minimum Investment Amount: The minimum amount required to invest in ICICI Prudential Dividend Yield Equity Fund via lump sum is ₹5,000 and via SIP is ₹100.

HDFC Dividend Yield Fund Direct Plan – Growth

Fund Performance: The HDFC Dividend Yield Fund comes under Equity category of HDFC Mutual Funds. 

Minimum Investment Amount: Whether by lump sum or SIP, the minimum investment amount required to invest in HDFC Dividend Yield Fund is ₹100.

LIC MF Dividend Yield Direct Plan – Growth

Fund Performance: The LIC MF Dividend Yield Fund has provided 24.76% annual returns in the last 3 years and 26.58% in the last 5 years. It falls under the Equity category of the LIC MF Dividend Yield Fund. 

Minimum Investment Amount: The minimum amount required via lump sum is ₹5,000 and via SIP is ₹1,000.

Templeton India Equity Income Direct Plan – Growth

Fund Performance: The Templeton India Equity Income Fund has provided 24.83% annual returns in the past 3 years and 27.91% in the past 5 years. It falls under the Equity category of Franklin Templeton Mutual Funds. 

Minimum Investment Amount: The minimum amount required via lump sum is ₹5,000 and via SIP is ₹500.

Aditya Birla Sun Life Dividend Yield Fund Direct Plan – Growth

Fund Performance: The Aditya Birla Sun Life Dividend Yield Fund has provided 24.81% annual returns in the past 3 years and 26.61% in the past 5 years. It falls under the Equity category of Aditya Birla Sun Life Mutual Funds. 

Minimum Investment Amount: The minimum amount required to invest via lump sum is ₹1,000 and via SIP is ₹100.

IDBI Dividend Yield Fund Direct Plan – Growth

Fund Performance: The IDBI Dividend Yield Fund falls under the Equity category of the IDBI Mutual Funds. 

Minimum Investment Amount: The minimum amount required to invest in the IDBI Dividend Yield Fund is ₹5,000 via lump sum and ₹500 via SIP.

UTI Dividend Yield Fund Direct Plan – Growth

Fund Performance: The UTI Dividend Fund has provided 21.81% annual returns in the last 3 years and 24.83% in the past 5 years. It falls under the Equity category of the UTI Mutual Fund.

Minimum Investment Amount: The minimum investment amount required via lump sum is ₹5,000 and via SIP is ₹500. 

Tata Dividend Yield Fund Direct Plan – Growth

Fund Performance: The Tata Dividend Yield Fund has provided 21.79% annualized returns in the past 3 years and 16.72% in the past 5 years. This dividend yield fund falls under the Equity category of the Tata Dividend Yield Fund. 

Minimum Investment Amount: The minimum amount required to invest in Tata Dividend Yield fund is ₹5,000 via lump sum and ₹500 via SIP. 

Sundaram Dividend Yield Fund Direct Plan – Growth

Fund Performance: The Sundaram Dividend Yield Fund has provided 20.4% annualized returns in the past 3 years and 24.44% in the past 5 years. This dividend yield fund falls under the Equity category of the Sundaram Dividend Yield Fund

Minimum Investment Amount: The minimum amount required to invest in Sundaram Dividend Yield fund is ₹5,000 via lump sum and ₹500 via SIP.

SBI Dividend Yield Fund Direct Plan – Growth

Fund Performance: The SBI Dividend Yield Fund falls under the Equity category of the SBI Dividend Yield Fund.

Minimum Investment Amount: The minimum amount required to invest in SBI Dividend Yield fund is ₹5,000 via lump sum and ₹500 via SIP.

Who Should Invest in Dividend Yield Funds?

There are two types of investors who can benefit the most from dividend yield funds:

Investors Seeking a Passive Income Source

Dividend yield funds offer regular dividend payouts to the investors and thus, they are a suitable choice for those looking for a passive income source. 

Investors with Low-Risk Tolerance

Dividend yield funds have much lower risks than other forms of equity mutual funds, making them a low-risk investment option.

Factors to Consider While Investing in Dividend Yield Funds

There are two factors that you need to consider when investing in top dividend yield mutual funds:

Risk Tolerance

If you’re a traditional investor who prefers a stable portfolio, you should search for funds with a higher allocation to dividend yield equities. It will help you reduce risk by investing in a low-risk program. 

Investment Tenure

Like other mutual funds, it’s important for you to check the investment tenure of the fund. A dividend yield with a higher investment tenure that has seen all the phases of the stock market will provide high returns.

Meanwhile, new companies' advertising funds may perform well when markets are high. However, to secure long-term benefits, investors must check the fund’s tenure and performance across different market cycles.

Major Advantages of Dividend Yield Mutual Fund

We’ve mentioned the benefits of investing in the best dividend yield mutual funds:

• Equity exposure at a lower risk: Dividend yield mutual funds are less impacted by market volatility than other equity-related mutual fund schemes. Thus, investors who are seeking higher returns and equity exposure but at a lower risk can choose dividend yield mutual fund schemes.
• High returns over a long tenure: Dividend yield funds invest in shares of companies that have strong financials and a proven track record. Hence, they have the potential to generate high returns over the course of time.
• Regular income: Dividend yield mutual funds are a great option for those investors seeking a regular and stable income stream.

Another benefit of dividend yield mutual funds is that investors can invest in two ways: lump-sum and Systematic Investment Plan (SIP). The former option allows you to invest the whole investment amount at once. SIP allows you to invest a fixed amount at regular intervals, such as monthly, yearly, or quarterly. 

Risks Involved While Investing in Dividend Yield Mutual Funds

Before you dive into dividend yield mutual funds, there are some investment risks that you should consider:

Risks of Mutual Funds

All types of mutual funds carry risks such as liquidity risk, credit risk, market risk, concentration risk, and more. These risks are present with dividend yield funds as well. 

Greater Risks

The Indian government has changed the tax incidence of dividend income and thus, there are higher taxes associated with dividend yields. 

Varied Returns

Dividend yield funds are less volatile to market conditions, however, the returns are always subject to market risks and cannot be guaranteed. 

Taxation Rules of Dividend Yield Mutual Funds

The following are the taxation rules for dividend yield mutual fund investors in India:

Tax Deducted at Source (TDS)

Under Section 194K of the Income Tax Act, 1961, the AMC deducts 10% TDS from the dividend paid to investors in case the total dividend exceeds ₹5,000 in a financial year.

Claiming TDS

When investors pay their taxes and only pay the remaining amount, they can claim the TDS deducted by the AMC. One can use a TDS calculator to ensure compliance with income tax regulations and avoid underpayment or overpayment of taxes.

Reporting Dividend Income

Investors are required to report their dividend income in their ITR. If required documents aren’t submitted, a higher TDS may be deducted but by filing ITR, it can be claimed.

FAQs

Q1. How does a dividend yield fund work?

Dividend yield funds have one goal of paying out monthly dividends to investors. Fund managers take care of it by investing mostly in securities of companies to provide monthly payouts. 

Q2. Are dividend yield funds a good investment?

Dividend yield funds are a good investment option if you’re seeking low risks and volatility as an investor. However, as an aggressive investor, you may only add it to your portfolio.

Q3. What is dividend yield?

The dividend yield is the amount of dividend paid per unit or per share which is later divided by the market price of such shares.

Q4. Is there an exit load for dividend yield funds?

Yes, when you sell mutual fund units, you will normally be charged an exit load. The percentage of your exit load is determined by the scheme’s parameters. 

Q5. Can the dividends declared by the underlying company be re-invested in the fund?

Yes, the dividends can be re-invested based on the guidelines and the type of the fund at the manager’s choice.

Q6. Where do Dividend Yield Mutual Funds invest?

Dividend yield mutual funds invest in stock of companies that have a history of paying high dividend yields with strong financials. 

Q7. Are Dividend Yield Mutual Funds high risk?

Dividend yield funds are less risky than other types of equity mutual funds and thus, they are low-risk funds. They are most suitable for those investors with a low risk tolerance.