Dividend yield mutual funds have gained immense popularity among investors looking for consistent income and capital appreciation. These funds invest in high-dividend-paying stocks, offering a steady income stream along with potential long-term growth. But which funds have performed the best over the last five years?
In this article, we will explore the top 5 dividend yield mutual funds with the highest returns in the past five years, helping you make an informed investment decision.
What Are Dividend Yield Mutual Funds?
Dividend yield mutual funds primarily invest in stocks of companies that regularly distribute dividends to shareholders. These funds are ideal for investors who seek passive income along with the possibility of capital appreciation. The dividend yield is calculated as:
Dividend Yield (%) = (Annual Dividend per Share / Price per Share) × 100
Investing in such funds helps mitigate risk while ensuring consistent returns, making them a preferred choice for conservative investors.
Top 5 Dividend Yield Mutual Funds with Highest Returns in 5 Years
1. ICICI Prudential Dividend Yield Equity Fund
- 5-Year Annualized Return: 15.8%
- Expense Ratio: 1.12%
- Category: Equity – Dividend Yield
- Minimum Investment: INR 5,000
- Why Invest? This fund focuses on high-dividend-paying companies with strong fundamentals, making it a great option for stable returns and growth.
2. UTI Dividend Yield Fund
- 5-Year Annualized Return: 14.9%
- Expense Ratio: 1.18%
- Category: Equity – Dividend Yield
- Minimum Investment: INR 5,000
- Why Invest? It maintains a diversified portfolio across sectors, ensuring minimal volatility and steady income generation.
3. HDFC Dividend Yield Fund
- 5-Year Annualized Return: 14.5%
- Expense Ratio: 1.10%
- Category: Equity – Dividend Yield
- Minimum Investment: INR 5,000
- Why Invest? Known for its consistent performance and lower expense ratio, this fund is a great pick for investors seeking a balance between growth and income.
4. Aditya Birla Sun Life Dividend Yield Fund
- 5-Year Annualized Return: 13.7%
- Expense Ratio: 1.15%
- Category: Equity – Dividend Yield
- Minimum Investment: INR 1,000
- Why Invest? The fund provides exposure to a mix of large-cap and mid-cap dividend-paying stocks, ensuring both stability and growth potential.
5. SBI Dividend Yield Fund
- 5-Year Annualized Return: 13.2%
- Expense Ratio: 1.22%
- Category: Equity – Dividend Yield
- Minimum Investment: INR 5,000
- Why Invest? Backed by SBI’s robust financial management, this fund is a solid choice for long-term wealth creation.
Frequently Asked Questions (FAQs)
1. Are Dividend Yield Mutual Funds Safe?
Dividend yield funds are generally considered safer than growth-oriented funds because they invest in well-established, profit-generating companies. However, they are still subject to market risks.
2. Who Should Invest in Dividend Yield Mutual Funds?
These funds are ideal for investors who want:
- Regular income through dividends
- Moderate risk exposure
- Long-term capital growth
3. How Are Dividend Yield Mutual Funds Taxed?
The taxation depends on the holding period:
- Short-Term (less than 1 year): 15% capital gains tax
- Long-Term (more than 1 year): 10% capital gains tax (on gains above INR 1 lakh)
4. How to Choose the Right Dividend Yield Mutual Fund?
Consider the following factors:
- Past Performance: Check historical returns
- Expense Ratio: Lower is better
- Portfolio Composition: Look for quality stocks
- Fund Manager Experience: Crucial for good performance
5. How Often Do These Funds Pay Dividends?
Dividend payments depend on the fund’s policy, which could be monthly, quarterly, or annually. Check the fund details before investing.
Conclusion
Dividend yield mutual funds are an excellent choice for investors seeking steady income and capital appreciation. The top-performing funds listed above have consistently provided high returns over the last five years, making them attractive investment options.
Before investing, analyze the fund’s performance, expense ratio, and risk factors to align with your financial goals. Always consult a financial advisor for personalized investment advice.
