- Date : 22/02/2023
- Read: 3 mins
The SBI Dividend Yield Fund opened its NFO on February 20 and will close on March 6.
The largest mutual fund in India has launched the SBI Dividend Yield Fund. Its NFO opened on February 20 and will close on March 6. Its objective is to build a dividend-paying portfolio. Rohit Shimpi will manage the scheme, and the Nifty 500 TRI will be the benchmark. The fund manager must invest at least 65% of the funds in companies paying dividends. It wants to build its portfolio so that the dividend yield is over 50% of the Nifty50 return.
What Has Worked in the Past?
The dividend-yield technique is not new. We expect a portfolio with a relatively higher dividend yield to stay put and not fall much during turbulence. Dividend payouts provide cash to shareholders timely and attract investors during times of fall. Most dividend-paying companies are considered well-established, and investors prefer investing in them.
SDF plans to build a stock portfolio across market caps that provide attractive dividend yields and have the potential for dividend growth. These portfolios are mostly diversified, reducing risks related to specific sectors. Some sectors they invest in are finance, metals and mining, power, construction, oil and gas, FMCGs, and IT. Some of the schemes in the dividend funds have been around for over a decade. Eight of these schemes manage Rs. 10,244 crores together. Dividend yield schemes returned 19.23% in the last three years. It is higher than flexi-cap fund return, which stood at 13.77%.
Value and dividend yield funds have been a surprise entrant in the returns aspect after the stock market crash in 2020. Experts believe that value funds will continue to do well amidst volatility. However, the good run will not last forever. Plan Ahead Wealth Advisors, chief financial planner, and founder Vishal Dhawan believes this investment style has returned after some time, and there is no reason to go for it. However, the track record suggests these are an excellent way to go.
Templeton India Equity Income Fund is a good option in dividend yield funds. The dividend yield strategy is attractive for investors who are risk averse. Aggressive and those investors looking to hold on to stocks across cycles must stay clear of these schemes and invest in other equity schemes depending on their risk-taking capacity.