HDFC Dividend Yield Mutual Fund is a NFO from the house of HDFC Mutual Fund.
It would be
an open equity scheme predominantly investing in dividend yielding stocks.
HDFC
Dividend Yield mutual Fund as the name suggests would be a fund investing in
stocks with a high dividend yield ratio.
The fund
would be open for subscription from November 27, 2020 to December 11, 2020.
NFO details for HDFC Dividend Yield Mutual
Fund
|
Scheme Opens |
27/11/2020 |
|
Scheme Closes |
11/12/2020 |
|
Fund Manager |
Mr. Gopal Agarwal |
|
Benchmark |
NIFTY Dividend Opportunities 50
TRI |
|
Minimum Investment (Lumpsum) |
5,000 |
|
Fund Category |
Dividend Yield |
|
Exit Load |
1% if redeemed within a year |
HDFC Dividend Yield Mutual Fund Investment
Objectives
The
investment objective of this dividend yield fund is to attain long term growth
while investing predominantly in equity and equity related instruments of
dividend yielding companies.
There is no
guarantee that the investment objective of the fund would be realized.
HDFC Dividend Yield mutual fund Allocation
The asset
allocation for this dividend yield fund would be something like this
|
Asset Class |
Minimum % |
Maximum % |
|
Equity and Equity related
instruments of Dividend Yielding companies |
65 |
100 |
|
Equity and Equity related
instruments of companies other than above |
0 |
35 |
|
Units issues by REITS and InvITs |
0 |
10 |
|
Non – convertible preference
shares |
0 |
10 |
|
Debt securities and money market
instruments and fixed income derivatives |
0 |
35 |
|
Units of Mutual funds |
0 |
20 |
The above
figures are only indicative and not fixed, the fund manager has the liberty to
move across the asset classes depending upon prevailing market conditions as
long as they remain within the mandate permitted.
The fund
can also invest in REITs and InvITs if so desired.
Additional reading: Click Here to read more about what are Dividend yield mutual funds
HDFC
Dividend Yield mutual fund Suitability
This fund is suitable for investors:
- Looking for a diversified portfolio of dividend yielding stocks.
- Who have an investment horizon of 3 years or more.
- Who are looking for a more stable and less volatile experience as compared to other equity mutual funds.
HDFC
Dividend Yield mutual fund Investment strategy
The fund aims to invest minimum 65% of its assets in
dividend yielding companies or companies that choose to do a buyback in
addition of payment of dividend or in lieu of dividend.
Preference would be given to stocks having a consistent
record of paying dividends at the time of investment or paying higher dividend
yield than NIFTY 50 Index.
The fund will be sector and market cap agnostic.
This equity fund would look for
- Companies that have low capital-intensive businesses with stable cash flows.
- Companies with growing profits and ability to increase dividends.
- Companies with surplus cash and opportunities across sectors.
What is
a Dividend Yield mutual fund?
A dividend yield mutual fund is a mutual fund scheme that
invests in companies that have historically declared dividends perpetually for
a long time.
Therefore, by default it means these mutual fund schemes
invest in companies with strong balance sheets, highly efficient management and
a robust functioning in place.
This is because a company can only declare high dividends
only if it makes good profits and it can only make good profits when it
satisfies all the qualifications mentioned above.
It is not enough that these companies pay high dividends
consistently to qualify for a dividend yield mutual fund, they also need to
have a high dividend yield.
The fact that the fund has to invest in a particular set of
stocks, makes the job of the fund manager easier considering his choices are
limited anyway.
A dividend yield fund is not one that pays dividends
regularly, it is one that invests in companies that pays dividends regularly.
The name of the fund denotes the approach of the fund rather
than a willingness or potential to pay dividends.
Additional reading: Click Here to read why you should NOT invest in Dividend mutual funds.
What
does Dividend Yield mean?
Dividend Yield is the dividend paid per unit divided by the
market price.
It is the ratio of past paid dividends to the market price
per share.
This includes both partial and full dividends.
Companies that pay dividends usually do so annually and then
there are some who may even do so more than once in a year.
A dividend yield ratio most importantly takes into account
the price of stock of the company.
If the stock price of a company is low for whatever reasons
but it has a good history of pay dividends regularly then it would be preferred
over a company with a high price and having a good track record of paying
dividends.
Advantages
of Dividend Yield mutual funds
A dividend yield mutual fund would by default only be
investing in quality stocks.
This is because only quality companies would be in a
position to declare dividends on a regular basis.
This therefore means that the portfolio is only built with
quality stocks.
Since the portfolio is made up of quality companies, it
helps the fund to counter volatility which is a given with equity investing.
These funds provide a better risk reward for a medium to
long term horizon outlook.
Disadvantages
of Dividend Yield mutual funds
The portfolio of such funds is restricted in terms of their
choices.
They can only invest in stocks of companies that have a high
dividend yield ratio.
Therefore, their hands are tied when it comes to portfolio
diversification.
These funds are not restricted with regards to caps be it
large cap, mid cap or small cap.
There is a possibility then that these funds could allocate
a higher proportion to mid and small cap companies.
Mid and small companies tend to fall the most in a volatile
market.
The fund manager would be going with stocks of companies
with a high dividend yield, irrespective of the cap.
Mid and small cap mutual funds need to be well diversified
so as to face volatile times efficiently but that cannot be the case here since
the fund manager’s choices are limited.
He/she can only pick mid and small cap companies with a high
dividend yield ratio.
You should
only invest in a dividend yield mutual fund if it adds something new to your
existing portfolio, is not part of your core portfolio and you have a very good
understanding as to the strategy applied by your dividend yield scheme because
every dividend yield mutual fund functions in a manner that is distinct from
the rest.
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