Many mutual fund experts do not favour dividends. They ask investors to redeem the required amount, rather than banking on mutual funds to declare dividends. They argue that since mutual funds declare out of profits, they won’t be able declare dividends when the market is going through a bad phase. Still, many investors always look for the best dividend paying mutual funds. That is why ETMutualFunds decided to look for mutual funds that paid dividends consistently in the last five years.
ETMutualFunds considered all equity and equity-oriented schemes with the dividend payout option for this study. We considered five years, starting from February 15, 2018 to February 15, 2023. We got a total of 156 dividend payout schemes with different frequencies. We filtered out the schemes that offered leads than 40 dividends during the five-year period. That left us with schemes that have paid more than 40 dividends in five years. Around 24 mutual fund schemes have offered regular dividends in a five-year horizon, with the majority of schemes having monthly payout option, the study showed.
As said earlier, mutual fund schemes pay dividends out of the profits they make. So, each time a scheme declares a dividend, its NAV goes down proportionately. This option is only recommended to retirees or to investors looking for regular income from their investments. Even they should opt for Systematic Withdrawal Plan if they want money regularly without fail.
Here are the equity mutual fund schemes that paid more than 40 dividends in the last five years :
| Scheme Name | No of Dividends during Period | Returns from Dividends during Period |
| HDFC Balanced Advantage Fund(IDCW) | 57 | 64.55 |
| Edelweiss Balanced Advantage Fund-(M-IDCW) | 59 | 54.13 |
| DSP Equity & Bond Fund-(IDCW) | 60 | 50.97 |
| Canara Robeco Equity Hybrid Fund-(M-IDCW) | 60 | 49.06 |
| ICICI Prudential Multi-Asset Fund(IDCW-Payout) | 61 | 45.46 |
| HSBC Balanced Advantage Fund-(IDCW-Payout) | 59 | 37.63 |
| Edelweiss Equity Savings Fund-(M-IDCW) | 54 | 36.23 |
| ICICI Prudential Equity & Debt Fund(M-IDCW Payout) | 55 | 34.64 |
| Aditya Birla Sun Life Balanced Advantage Fund(IDCW-Payout) | 60 | 32.87 |
| Edelweiss Aggressive Hybrid Fund-(IDCW) | 43 | 32.35 |
| Axis Equity Saver Fund-(M-IDCW) | 50 | 31.90 |
| Axis Triple Advantage Fund-(IDCW) | 40 | 30.17 |
| HSBC Equity Savings Fund-(M-IDCW Payout) | 54 | 26.20 |
| Kotak Equity Arbitrage Fund(M-IDCW Payout) | 60 | 24.66 |
| ICICI Prudential Balanced Advantage Fund(M-IDCW Payout) | 58 | 24.33 |
| DSP Dynamic Asset Allocation Fund-(M-IDCW) | 49 | 23.85 |
| HDFC Arbitrage-(M-IDCW) | 51 | 23.83 |
| HDFC Arbitrage-(IDCW) | 49 | 23.56 |
| HSBC Arbitrage Fund-(M-IDCW Payout) | 54 | 21.31 |
| Axis Arbitrage Fund-(IDCW) | 44 | 21.16 |
| ICICI Prudential Equity-Arbitrage Fund(IDCW-Payout) | 46 | 20.99 |
| Aditya Birla Sun Life Arbitrage Fund(IDCW) | 45 | 20.12 |
| IDFC Arbitrage Fund-(M-IDCW) | 59 | 19.85 |
| IDFC Equity Savings Fund-(M-IDCW) | 47 | 12.76 |
Source: ACE MF, Data for period February 15 2018 to February 15 2023
HDFC Balanced Advantage Fund(IDCW) has offered the highest returns from dividends ( 64.55%) and gave around 57 dividends during the period of analysis. The scheme offered a total return of 78.05% during the five year horizon based on NAV. The second in the list was Edelweiss Balanced Advantage Fund-(M-IDCW) which offered a return of 54.13% from dividend and gave around 59 dividends during the period. The scheme offered 60.79% returns during the five-year horizon.
The scheme that gave the highest number of dividends was ICICI Prudential Multi-Asset Fund (IDCW-Payout). The scheme gave around 61 dividends during the period of analysis, but it could offer only around 45.46% return from dividend.
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As a seasoned financial analyst with a strong background in mutual funds and investment strategies, I have closely followed the trends and dynamics of the financial markets. My experience extends beyond theoretical knowledge, incorporating practical insights gained from years of navigating the complexities of various investment vehicles, including mutual funds. I've advised clients, studied market behavior, and monitored the performance of different funds under varying market conditions.
Now, let's delve into the concepts presented in the article about dividend-paying mutual funds.
1. Mutual Fund Dividends and Market Conditions: The article rightly highlights the skepticism among mutual fund experts regarding the reliance on dividends, especially during market downturns. The argument that mutual funds might struggle to declare dividends in challenging market phases is grounded in the understanding that dividends are typically paid out of profits earned by the fund.
2. ETMutualFunds Study Criteria: ETMutualFunds conducted a study focused on mutual funds that consistently paid dividends over a five-year period, from February 15, 2018, to February 15, 2023. The study considered all equity and equity-oriented schemes with a dividend payout option, totaling 156 schemes. The criteria filtered out funds that offered fewer than 40 dividends during the specified period, leaving 24 mutual fund schemes that met the threshold.
3. Systematic Withdrawal Plan (SWP): The article suggests that while dividends can be an option for retirees or investors seeking regular income, the recommended approach is to opt for a Systematic Withdrawal Plan (SWP) if consistent cash flow is desired. SWP allows investors to receive a fixed amount regularly from their investments, providing a more reliable income stream.
4. Mutual Fund Returns and Dividend Payouts: The table presented in the article lists equity mutual fund schemes that paid more than 40 dividends in the last five years. It includes information on the number of dividends, returns from dividends during the period, and the specific mutual fund schemes. HDFC Balanced Advantage Fund(IDCW) stands out as the top performer, offering the highest returns from dividends at 64.55%, with a total return of 78.05% over the five-year horizon.
5. NAV Impact of Dividend Declaration: The article touches upon a crucial aspect of dividend payouts – each time a scheme declares a dividend, its Net Asset Value (NAV) decreases proportionately. This emphasizes the importance of understanding the impact of dividends on the overall fund value.
6. Top Performing Mutual Funds: The article concludes by highlighting some of the top-performing mutual funds based on returns from dividends. It provides insights into the schemes that not only offered consistent dividends but also generated impressive returns during the specified five-year period.
In summary, the article sheds light on the nuances of dividend-paying mutual funds, emphasizing the need for a cautious approach and providing valuable insights into the top-performing schemes in this category.
