Dividend Yield Funds

Dividend yield funds invest in companies based on a conservative strategy of dividend yield. Dividend yield is measured in cash flow, received by investors per rupee invested in the company. For instance, if company ABC declares a dividend of ₹20 per share in a year, and company XYZ declares a dividend of ₹15 per share, and their current market prices are ₹50 and ₹30 respectively, then ABC's dividend yield would be 40% (20/50) and XYZ's dividend yield would be 50% (15/30). Dividend yield funds are categorized under value style of investment, while most of the portfolio invests in high dividend and attractive valuation stocks. Therefore, investors benefit from both capital appreciation and dividends. There are several dividend yield funds in the country. The Birla Sun Life Dividend Yield Plus was launched in 2003. As of June 2012, all dividend yield funds had assets under management (AUM) of ₹5,274 crores, with a return of approximately 2.65% equity funds. However, this has significantly increased now.

The performance of these plans over 8 years according to the calendar year shows that the S&P CNX Nifty outperformed during 2006-2011 for six consecutive years. There was marginal underperformance in 2005. Until 2012, which has not yet been completed, this category has left the market benchmark behind. These funds are ideal for equity fund investors who want to invest with a conservative strategy in volatile markets. However, the minimum investment period in this category should be at least 5 years. In terms of taxes, all dividends received, including dividend yield funds, are tax-free. To select the appropriate dividend yield fund, investors can refer to the quarterly CRISIL Mutual Fund Ranking available on www.crisil.com.