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Invest at 0% Commission in 1,500+ Direct Mutual Fund Schemes
Dividend Yield Mutual Funds
3 Year Average Returns
11.99%
Funds on Dhan
12
Dividend Yield Funds are a type of Equity Funds that invest in stocks that pay high dividends to their shareholders. These Funds focus on income generation rather than capital appreciation. While these are the best Dividend Yield Mutual Funds to invest in, you must know these 3 things before you start investing.
- Goal: Dividend Yield Funds provide regular income. These Funds invest in companies that have a consistent track record of paying dividends, which can supplement your cash flow.
- Investment Horizon: Suitable for those looking for income along with investment growth for at least 5 years.
- Risk: While offering income, these Funds can still see value fluctuations based on market conditions.
Best Dividend Yield Funds to Invest in 2026
Note: 3Y & 5Y returns are annualised. Rest everything is absolute.
Scheme | AUM (in Cr.) | Fund Age | 1W | 1M | 3M | 6M | 1Y | 3Y  | 5Y |
|---|---|---|---|---|---|---|---|---|---|
Compare | ₹ 738 | 7 Yrs | -1.67% | -4.90% | -4.50% | 1.78% | -1.61% | 17.83% | 13.23% |
Compare | ₹ 6,328 | 12 Yrs | -1.27% | -3.91% | -8.16% | -7.17% | -10.09% | 13.37% | 14.07% |
Compare | ₹ 1,109 | 5 Yrs | -2.67% | -5.94% | -5.89% | -3.33% | -1.10% | 12.69% | 11.80% |
Compare | ₹ 3,582 | 13 Yrs | -1.09% | -2.40% | -4.84% | -4.03% | -7.22% | 12.66% | 9.37% |
Compare | ₹ 1,382 | 13 Yrs | -3.19% | -6.21% | -5.82% | -7.24% | -6.37% | 10.74% | 11.11% |
Compare | ₹ 5,274 | 5 Yrs | -1.34% | -3.18% | -4.59% | -2.53% | -6.91% | 10.71% | 11.81% |
Compare | ₹ 2,179 | 13 Yrs | -1.67% | -4.04% | -5.25% | -5.95% | -7.96% | 10.63% | 10.25% |
Compare | ₹ 8,059 | 3 Yrs | -0.61% | -4.29% | -4.94% | -1.93% | -4.01% | 10.16% | 0.00% |
Compare | ₹ 757 | 13 Yrs | -1.09% | -2.96% | -5.24% | -6.55% | -9.93% | 9.09% | 8.59% |
Compare | ₹ 532 | 2 Yrs | -0.94% | -4.42% | -4.72% | -3.25% | -5.28% | 0.00% | 0.00% |
Compare | ₹ 273 | 0 Yrs | -1.08% | -3.62% | -6.87% | -5.51% | 0.00% | 0.00% | 0.00% |
Compare | ₹ 421 | 0 Yrs | -1.54% | -3.11% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
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Disclaimer: Mutual fund investments carry market risks; read all scheme-related documents carefully. Past performance does not guarantee future returns.
About Dividend Yield Funds
Dividend Yield Funds invest in companies with a history of paying regular dividends. If you are looking for investment options that provide you with regular income, dividend yield funds are a good option. Here are the main features of Dividend Yield Funds:
- Dividend Yield Mutual Funds only make investments in companies that pay regular dividends and have solid financials and steady cash flow.
- SEBI regulations require Dividend Yield Mutual Funds to allocate at least 65% of their funds to equity and equity-related instruments. The rest of the money is invested in other assets to maximize capital appreciation.
- Dividend Yield Funds are still vulnerable to volatility and market risks. Depending on how well the underlying stocks perform, the fund's value may increase or decrease.
Dividend Yield Funds are an excellent passive income alternative for individuals looking for a constant stream of income from their investments. Here are some main benefits of investing in Dividend Yield Funds:
- Dividend Yield Funds provide both income and capital growth opportunities. If the underlying stocks improve in value, you can profit from both dividend income and the fund's net asset value (NAV) increase.
- Companies that pay out large dividends tend to stay steady, and their stocks can withstand market ups and downs.
- Dividend Yield Funds maintain a diverse portfolio of stocks covering various businesses and sectors. It could make your investing portfolio more resilient and steady. Also, it will help you to mitigate the risk of investing in a single investment instrument.
- These funds typically invest in companies with good fundamentals. As a result, it can help you grow wealth over time while reducing volatility.
When deciding whether Dividend Yield Funds are a good fit for your investing strategy, keep the following factors in mind:
- The primary purpose of such investments is to generate steady dividend income. If you are looking for an additional source of income, then Dividend Yield Funds are a great choice. These funds are ideal for new investors.
- Dividend Yield Funds generate lower returns than mid-caps or small-caps since they invest in stable companies that focus on paying out high dividends. So, understand this and check if this aligns with your goals.
- Dividend yield funds are ideal for longer-term investing. If you have short-term financial goals, there may be better investment options.
- Your financial preferences and time horizon are essential considerations. If you want to invest in these funds, look for funds with a large corpus, low historical volatility, and a low expense ratio.
You can consider these factors to check if these funds are a good choice for you or not:
- Dividend Yield Funds can assist you in creating a diverse portfolio. These schemes tend to be less volatile than small and mid-cap equity funds because they invest primarily in large-cap companies. Therefore, to balance off the risk, they can be added to an aggressive portfolio.
- Dividend Yield Funds focus on established, dividend-paying companies, making them suited for conservative investors. Dividend payments indicate stability, thus investing in fundamentally good companies reduces your risk.
- These funds are an appropriate choice for retirement planning. Regular dividend income can be an important component of a retirement income plan.
- Dividend Yield Funds can help balance your portfolio over a long time horizon. You must carefully evaluate the fund's performance by considering several factors such as past performance, expense ratios, and the fund manager's history.
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FAQs
Equity Dividend Yield Funds primarily invest in stocks of companies that pay high dividends. By focusing on such stocks, these funds aim to provide you with regular income through dividends while also offering the potential for capital appreciation. They select companies that have a track record of paying dividends consistently, making them an attractive option for those seeking passive income and capital appreciation.
Equity Dividend Yield Funds are typically invested in a mix of high-dividend-paying stocks across various sectors. These funds aim for stocks that have a higher dividend yield than the average market yield, often focusing on well-established, financially stable companies. By diversifying across sectors, these funds strive to mitigate risk while seeking to generate steady income for you.
Equity Dividend Yield Funds can give profit through two main sources: dividend payouts and capital appreciation. You receive dividends when the fund's underlying companies distribute profits. Additionally, if the stock prices of these companies increase, you benefit from capital appreciation. However, like all equity investments, these funds carry market risks, and returns can vary.
No, Equity Dividend Yield Funds are not tax-free. The dividends you receive are added to your total income and taxed according to your income tax slab rates. This change came into effect from April 1, 2020, when the dividend distribution tax (DDT) was abolished, and dividends were made taxable in the hands of the investors.
Profits from Equity Dividend Yield Funds are subject to capital gains tax. If you sell your fund units within a year, short-term capital gains tax (STCG) of 15% applies. For sales after a year, long-term capital gains (LTCG) above ₹1 lakh are taxed at 10% without indexation benefit. Dividends are taxed at your applicable income tax slab rate.
To choose the best Equity Dividend Yield Fund, consider factors like the fund's performance history, dividend yield, consistency of dividend payments, expense ratio, and the fund manager's experience. Also, assess your risk tolerance and investment horizon. Comparing these aspects across funds can help you select one that aligns with your financial goals and risk appetite.
No, it's not strictly necessary to have a Demat account to invest in Equity Dividend Yield Funds. You can invest directly through the asset management company (AMCs) that offers the fund or via mutual fund investment platforms. However, having a Demat account can simplify the tracking and management of your investments, especially if you also invest in stocks or other securities.
Your financial status and market conditions will determine whether you want to invest in Equity Dividend Yield Funds lump-sum or via a Systematic Investment Plan (SIP). If you want to invest often without having to worry about market timing, SIPs are a wonderful way to average your purchase price over time. Lump-sum investments might be preferable if you have a significant amount of money to invest during a market dip, potentially offering higher returns.
To start an Dividend Yield Fund SIP online, follow these 4 steps:
- Open Demat Account
- Choose the Equity Fund you wish to invest in.
- Choose the SIP option, specifying the amount and SIP date
- Set up an auto-pay via bank account to automate the SIP payments
Yes, you can sell or redeem your units of Equity Dividend Yield Funds at any time. However, it's essential to check if there are any exit loads, which are fees charged for withdrawing your investment within a specific period. These loads are designed to discourage short-term trading and vary from fund to fund, so understanding these details before selling can help you make a more informed decision.
Equity Dividend Yield Funds typically do not have a lock-in period, allowing you the flexibility to enter and exit the investment as per your financial goals and market outlook. However, some specific funds or investment options might impose conditions or periods where withdrawals may attract charges, so it's advisable to review the fund's scheme information document for any such details.
While Equity Dividend Yield Funds invest in companies with a stable dividend-paying track record, they are still subject to market risks. The fund's performance can be affected by changes in market conditions, economic factors, and company-specific events. Additionally, since these funds invest in equities, they are susceptible to market volatility and the inherent risks of stock investing, including the possibility of receiving lower or no dividends.
There is no such thing as a risk-free investment, and that includes equity dividend yield funds. These funds invest in the stock market, which is subject to fluctuations and volatility based on various factors like economic changes, market sentiment, and company performance. While they aim to generate income through dividends, the principal amount invested can vary in value, and there's no guarantee of returns. Diversification and prudent selection can mitigate risks, but cannot entirely eliminate them.
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