Best Dividend Paying Mutual Funds in India 2025
Dividend mutual funds refer to stock mutual funds that chiefly invest in organisations that offer dividends. Dividends refer to profits or revenues that are earned by companies and which are shared with the shareholders of the company.
Table of Contents
The profits are nothing but the yield that mutual funds get by selling the shares at prices higher than what it was purchased for. Depending on the scheme, the fund manager can either declare a dividend or use the profits to purchase stocks.
When you invest in a debt mutual fund, you will be able to enjoy predictable returns. On the other hand, when you invest in an equity-linked fund, your returns will be very volatile in nature. However, when you choose an equity-linked fund that offers dividends, you can enjoy maximum profitability which will result in excellent growth for your funds.
Best Dividend-Paying Mutual Funds in 2025
Some of the top best dividend-paying mutual funds in 2025 are given below:
Name of the Mutual Fund | 1 year | 3 years | 5 Years |
HDFC Dividend Yield Fund Direct Growth | 41.35% | 29.70% | NA |
ICICI Dividend Yield Fund Direct Growth | 42.58% | 32.68% | 22.49% |
Templeton India Equity Income Direct Plan Growth | 35.10% | 27.35% | 22.75% |
Aditya Birla Sunlife Dividend Yield Fund Direct Growth | 43.40% | 28.36% | 21.70% |
Sundaram Dividend Yield Fund Direct Growth | 37.29% | 21.80% | 19.55% |
IDBI Dividend Yield Fund Direct Growth | 20.48% | 22.44% | NA |
Tata Dividend Yield Fund Direct Growth | 39.32% | 9.08% | 16.72% |
SBI Dividend Yield Fund Direct Growth | NA | NA | NA |
UTI Dividend Yield Fund Direct Growth | 34.43% | 20.92% | 18.02% |
LIC MF Dividend Yield Fund Direct Growth | 40.00% | 21.69% | NA |
How Do Dividend-Paying Mutual Funds Work?
Dividend-paying mutual funds provide investors with annualised payouts. These payouts will be made on a regular basis and hence, as an investor, you will feel safe and secure with these funds. These dividends will be paid from the revenues earned by the fund during the previous year.
Mutual Funds (MF) with a dividend option do not show a high growth in their Net Asset Value (NAV) because the dividends are paid out on reaching a specific level almost immediately. Fund houses are required to pay 28.84% as a Dividend Distribution Tax (DDT) in the case of debt funds and this is inclusive of cess and surcharge. Equity mutual funds, on the other hand, do not attract a DDT.
Dividend mutual funds are ideal for investors who do not have an appetite for risk and who wish to receive regular payouts as a source of income.
How do I Invest in Funds that Yield Dividends?
The steps to invest in funds that yield dividends are given below:
- You can either visit the official website of the mutual fund or use third-party websites which allow you to invest in mutual funds and choose the mutual fund that yields dividends to invest.
- Once you have chosen the mutual fund, you can choose the amount and mode of investment- Lumpsum or SIP.
- You will then have to complete your KYC and then start investing.
Disclaimer
Mutual Fund investments will be subject to market risks. Any mutual fund listed in the article does not guarantee fund performance or its underlying creditworthiness. We have created the list given above by taking only one factor into consideration, which is the payment of dividends. These above-mentioned funds will most likely offer excellent returns according to the dividends earned by the fund. These results can vary with time.
FAQs on Top Dividend Paying Mutual Funds
- What is the optimal duration for investing in Dividend Yield Mutual Funds?
Thematic-Dividend yield mutual funds need you to hold your investment for a minimum of five years because they are equity funds, meaning they invest in company stocks.
- Mutual funds with dividend yields invest where?
A minimum of 80% of the assets of thematic funds must be allocated to equities associated with a specific subject. A Thematic Infrastructure Fund, for example, will purchase stocks associated with the infrastructure theme.
- What type of returns is Dividend Yield likely to offer?
Over the past five years, Dividend Yield Funds have produced returns of 21.07% annually on average. The annualised returns for their three and ten years are 17.42% and 28.12% p.a.
- Are mutual funds with dividend yields highly risky?
Theme-Dividend returns Mutual funds can be volatile in the near term since they invest in stocks. But, in the long run, the risk significantly decreases.
- How do investment houses choose "High Dividend" businesses?
When choosing "High Dividend" firms, most fund houses compare the yield on their dividends to a benchmark index such as the Sensex or Nifty 50. For instance, a fund firm would prefer to invest in companies with dividend yields higher than 1.25 if the current Nifty 50 dividend yield is close to 1.25.
- Do dividend yield funds limit their investments to "High Dividend" firms?
Approximately 75–80% of the capital of the majority of dividend yield funds is invested in high dividend-paying companies.
- Is investing in dividend yield ETFs a wise decision?
Generally, dividend yield funds are a reliable option for people seeking equities with little volatility. Though they are a good addition to most investing portfolios, these funds are not advised for ardent growth-seekers.
- Why does the price of a mutual fund share typically decline shortly after a dividend is paid?
When dividends are paid, the value of mutual fund shares decreases since the funds are taken out of the fund's current assets.
Disclaimer
Credit Card:
Credit Score:
Personal Loan:
Home Loan:
Fixed Deposit:
Copyright © 2025 BankBazaar.com.