Best Dividend Paying Mutual Funds in India

Dividend paying mutual funds are my favourite investment vehicle. Why?

I like them because it can generate short term income.

“Income generation” and “equity investments” does not go hand in hand.

This is why, regular dividends from equity based funds makes it unique. I love it.

But income seekers must play cautiously with mutual funds. Why?


Because regular income from equity is not as predictable.

Debt linked plans can pay income more regularly.

But I still prefer equity linked mutual funds to generate income.

The thing that I like about them is their potential to “grow dividends” over time.

In debt linked plans, yield remains same.

But in equity plans, dividend yield can go up-and-up with time.

#1. Dividend : direct stocks vs mutual funds…

Why not buy stocks directly and earn dividends?

Yes, this is a good idea.

But stock investing requires more skill.

Dividend income generation from direct stocks is not as simple.

Dividend paying mutual funds can earn you dividends much easily.

What is the problem with direct stocks?

It is not simple to identify stocks that can pay consistently higher dividends.

For a longer time horizons (like 10-15 years), the complexity doubles.

Experts ca buy direct stocks for dividends.

But for non-experts, mutual funds is a better alternative.

Why direct stocks investing is tricky?

Identification of a good dividend paying stocks requires digging into its financial statement.

Do we know to read Balance Sheets etc of companies? No.

Without analysing stocks like this, one cannot buy good stocks.

So what is the way out?

Buy dividend paying mutual funds instead of direct stocks.

The main objective of these mutual fund is to maximise the dividend yield for its investors.

#2. Dividend Yield of Mutual Fund

How mutual funds yield dividends?

They sell their share holdings to generate cash.

This cash, generated from redemption, is distributed as dividends.

Dividend paying mutual funds redeem a portion of their holdings on regular basis.

The profit portion obtained from redemption is distributed to unit-holders as dividends.

Suppose NAV of a mutual fund is $20 per unit.

This mutual fund decided to distribute $1.5 per unit as dividend.

In this case the dividend yield will be 7.5% (1.5/20).

As a rule of thumb, dividend yield above 4% can be considered reasonable.

#3. Dividend mutual funds are convenient…

Investors who buy dividend paying funds need not worry the details like:

  • Which stocks to buy?
  • When to sell stocks?
  • How much shares to sell? etc

Investors can simply focus on the mutual fund price, and keep buying it time and again.

The details are taken care by the Fund Manager.

Who are Fund Manager’s?

They are generally MBA’s from top Institutes like IIM’s.

It is the job of Fund Manger to buy good stocks on our behalf.

They are heavily paid to do this job. The stocks they select are prime & perfect.

These stocks in turn ensures consistent dividend income for we investors.

#4. Dividend Mutual Funds – no capital appreciation..

NAV of Dividend paying mutual funds does not appreciate with time.

What does it mean?

Every time the dividend is paid, NAV of these mutual funds falls back.

One “cannot” take the dual advantage from investing in dividend mutual fund.

Dual advantage means?

  1. Capital appreciation (price growth).
  2. Regular income (dividend).

What to do if one wants to invest for capital appreciation?

Generally all mutual funds offer following two plans:

  1. Growth (G).
  2. Dividend (D).

For capital appreciation, invest in mutual funds offering Growth (G) plan.

#4.1 Difference between growth and dividend plan – Profit Booking

Both type of mutual funds (growth and dividend) regularly book profits.

Non-dividend paying fund, use their booked-profits to buy more stocks/assets.

Hence these type of mutual funds ensures long term capital appreciation

Dividend paying fund, us their booked-profits to pay dividends to unit-holders.

Generally mutual funds pay dividends one or twice in a year.

#5. How dividend is paid by Mutual Funds…

 

Dividend is paid from the profit booked by the fund in last one year (say).

If there is no profit, there will be no dividend disbursement.

These days dividend is credited directly to the investors bank account.

Even in dividend mutual funds, there are two options:

  1. “Dividend payout” option and,
  2. “Dividend reinvest” option.

In case of dividend reinvest option, dividend will not be paid to the unit holder.

The payable money is used to buy more units of the same mutual fund.

In case of dividend payout option, the unit holder will receive dividend in his/her bank account.

#6. Dividend distribution tax (DDT) on dividends.

Dividend earning from equity linked mutual fund were not taxed before Feb’18.

But after the new rule, 10% DDT has been imposed on dividends.

Earlier DDT was applicable only on dividend paid by debt linked mutual funds (@28%).

Equity linked funds were spared.

But post Feb’18, 10% DDT has been imposed on

Courtesy, imposition of LTCG on equity investment.

How to distinguish between equity linked or debt linked funds?

Look into its portfolio composition.

If weightage of equity in portfolio more than 65%, the fund is equity linked.

#7. Dividend mutual funds always pay dividends?

Dividend earning from mutual funds is not assured.

Dividends are paid from the “booked profits”.

If the profit could not be booked, there are no dividends available for payment.

When this situation can arrive?

When mutual fund NAV has not appreciated.

Hence, in case of bullish market, probability of getting dividends are higher.

#8. Yields of Growth Funds are higher?

In long term, returns of both funds will be similar.

In dividend payout option, money is credited to investors bank account.

To further increase the returns, investor must re-invest this money.

It is very important to keep this cash rolling.

Best Dividend Paying Mutual Funds in India

(Updated as on Apr’2018)

  1. Reliance Vision (D)
  2. Franklin India Bluechip Fund (D)
  3. Birla Sun Life Top 100 Fund (D)
  4. ICICI Pru Value Discovery Fund (D)
  5. Franklin India Flexi Cap Fund (D)
  6. DSP BlackRock Equity Fund – Regular Plan (D)
  7. Kotak 50 – Regular Plan (D)
  8. HDFC Top 200 Fund (D)
  9. SBI Magnum Equity Fund (D)
  10. HDFC Long Term Advantage Fund (D)

Click here to get the detailed dividend payment history of the above mutual funds (24 numbers in total) in a tabulated form…


Disclaimer: All blog posts of getmoneyrich.com are for information only. No blog posts should be considered as an investment advice or as a recommendation. The user must self-analyse all securities before investing in one.

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27 Comments on "Best Dividend Paying Mutual Funds in India"

  1. Please suggest me good dividend paying MF I am aged 72 years

  2. Really this article is useful ,and i want to know about best funds which sustained for aleast 5 years by giving higher returns .IFi invest in both Dividend and growth ,it will be useful ,Pls suggest a nice fund company

  3. R Gopalakrishnan | September 9, 2017 at 4:00 am | Reply

    I want to take two MFs each of Rs 5 L. Conditions
    1. I should get very good annual dividend every year., say 12 to 15 %
    2 Their track record of paying dividends for the last three years should be better than what it is the present
    3 Dividend payment should be due any time from November this year to March end 2018
    4 No SIP please
    Regards

  4. Thanks for this blog…outstanding.

    • Mohanakrishnan | August 29, 2017 at 2:10 pm | Reply

      I believe that Franklin India High Growth Companies Fund has good dividend paying potential in the years to come. Please analyse this scheme as well in your next update. Thanks

  5. Why not you mention monthly dividend mutual fund name sir

  6. VIKUL PATEL | May 10, 2017 at 2:45 pm | Reply

    I am 55 years and most of my money is in FDs. I invested RS 10 lakhs in 7.8% and FDs. I guess it should be possible to secure about 12% income annually on actual investment with moderate risk.

    Can you suggest two or three such investments?

  7. Suresh Kumar T | February 3, 2017 at 10:23 pm | Reply

    Let me know about the best five monthly dividend paying Mutual Funds with their monthly performance track for two years. I wish to have a monthly Dividend of Rs.5000/-. I hope the information will help me to decide the size of required one time investment.

  8. Nice educative information and data. But as far as dividend yield is concerned it is not know how the same is arrived at whether it is on latest dividend and NAV?

  9. Wonderful.. Thanks. Keep it up.. I have subscribed recently, but I haven’t got any acknowledge.

  10. SEND ME NAME OF MUTUAL FUND WHICH IS GIVING MONTHLY DIVINEND

  11. A Visweswara Rao | November 19, 2016 at 9:50 pm | Reply

    I am 70 years and most of my money is in FDs. I invested Rs.30 lakhs in Jeevan Akshyay with yield of 7.8% and FDs are about Rs.80 lakhs (average yild of 8-9%. I propose to divert about Rs.25 lakhs to mutual funds. I guess it should be possible to secure about 12% income annually on actual investment with moderate risk.

    Can you suggest two or three such investments?

  12. High yield bonds | November 10, 2016 at 8:30 pm | Reply

    It’s hard to find knowledgeable people for this subject, however, you seem like you know what you’re talking about!
    Thanks

  13. I am 73 years old. I have about Rs 250000 to invest . please suggest how much I should in debt fund, balance fund and equity fund, to have maximum return on the same in investment

  14. Very nice , unbelievable.

  15. Nizarali Mahesania | September 27, 2016 at 8:33 pm | Reply

    Sir, which mutual fund is better Growth, dividend payout or dividend reinvestmentplan

  16. Anis Mohiuddin | July 19, 2016 at 7:49 pm | Reply

    Hi, I am 68 and need to buy a small car for which there will be an EMI of about 9000/- which I wish to cover with a monthly dividend pay out MF scheme with a suitable one time investment. Can you suggest something to suit my need. I have found out that HDFC Prudence Fund has been paying regular monthly dividend of about 30p per unit and at present unit NAV stands at Rs. 33.32 (Direct plan) but regular plan NAV stands at 29.34. I will wait to receive your advice before deciding. Thanks.

  17. nice post. good to know many things.

  18. Hi,
    I am influenced by the post updated in https://www.getmoneyrich.com/high-dividend-paying-mutual-funds/.
    My requirement is that investing through SIP under ELSS and from that get some good returns as my investment will be more than 5 years as of now and investment amount per month would be around Rs.2000 to Rs.3000. Kindly let me know where can i see the best dividends details also if some stocks which provides good dividends even if they dont false under ELSS.

  19. Hello! I’ve been reading your website for a while now
    and finally got the bravery to go ahead and give you a shout out from
    Dallas Tx! Just wanted to tell you keep up the good job!

  20. mohsin khan | June 8, 2015 at 2:24 am | Reply

    Feedback
    it is humble request to all AMC and all online investment platforms brokers and sub brokers
    please send yearly one statement on paper at address registered with you
    because we are mostly invest online if suddenly something happened to us accidentally then family members dont know about our online investment and you send statements on e-mail id it is have password how family members know how many amount in how many folios we have ?
    Because all AMC do not have their offices in every city’s of Maharashtra or other state in india
    if i accidentally death where to go my family members and nominated person to transferred all fund or redeem all fund on his/her name
    Request to you please send one yearly hard copy of all investment online or offline PAN number base send on registered address most important which contains how to nominee redeem or transferred all investment on nominated person and clear maintains all processes all foms all documents details to help nominated person or families
    Because nominee or families do not worried about what to do ????

  21. Hello there! I could have sworn I’ve been tto this website
    before but aftyer browsing through some of the articles I realized it’s new to me.

    Regardless, I’m definitely pleased I found it and
    I’ll be book-marking itt and checking back frequently!

  22. Great post .

    I want to know the dividend paying mf of ELSS scheme . Its better if you give me reference from which site I can get the dividend yield data.

    I was influenced by the post . so searching for it . Also let me know your views

  23. my question is if one can opt for best large cap funds with dividend payout option to earn high dividends

Your comments fuels me to write better...