Top Mutual Funds, Dividend Yield Funds: Investing in mutual funds is one of the most popular ways to grow wealth in India. But before putting your hard-earned money into any fund, it’s always wise to check its past performance 📊 and compare it with similar schemes.
👉 While past returns do not guarantee future performance, they help set realistic expectations and give you a sense of how the fund has managed money over time.
In this article, we explore a special category of mutual funds – Dividend Yield Funds – and highlight those schemes that have delivered more than 20% annualised return in the past five years.
💡 To put it simply:
If someone had invested ₹1 lakh in such a fund five years ago, the money would have grown to ₹2,48,832 today at a 20% CAGR (compound annual growth rate). 🚀
🏦 What Are Dividend Yield Mutual Funds?
Dividend Yield Mutual Funds are a unique category of equity mutual funds.
- These funds primarily invest in dividend-paying companies.
- As per SEBI rules, they must allocate at least 65% of their portfolio to equity.
- Typically, these companies are established businesses with stable earnings, which makes them relatively less volatile compared to pure growth funds.
📉 However, despite their attractive structure, dividend yield funds are not very popular among Indian investors. Currently, there are only 10 such schemes with a combined asset size of ₹32,558 crore across different fund houses.
📊 Top Dividend Yield Funds with 20%+ Annualised Returns
Here are the best-performing Dividend Yield Mutual Funds that have given investors over 20% annualised returns in the last five years:
| 🏆 Dividend Yield Fund | 📈 5-Year Annualised Return (%) |
|---|---|
| ICICI Prudential Dividend Yield Fund | ⭐ 27.40% |
| Franklin India Dividend Yield Fund | 23.56% |
| Aditya Birla Sun Life Dividend Yield Fund | 20.87% |
| LIC MF Dividend Yield Fund | 20.81% |
| UTI Dividend Yield Fund | 20.66% |
✨ From this table, it’s clear that:
- ICICI Prudential Dividend Yield Fund is the star performer with 27.40% CAGR, turning ₹1 lakh into more than ₹3.3 lakh in 5 years.
- Franklin India Dividend Yield Fund is the next best with 23.56% CAGR.
- Other strong performers like Aditya Birla Sun Life, LIC MF, and UTI Dividend Yield Funds also comfortably crossed the 20% CAGR mark.
💡 Why Do Dividend Yield Funds Perform Well?
Several factors make these funds attractive:
✅ Stable Companies – They usually invest in large, stable companies that distribute profits regularly.
✅ Lower Volatility – Dividend-paying companies are often less volatile than growth stocks.
✅ Wealth Compounding – Over time, reinvested dividends combined with capital appreciation deliver strong compounding.
✅ Defensive Nature – These funds tend to do relatively well during market downturns since dividend-paying companies are financially stronger.
⚠️ Things Investors Must Remember
While high past returns look exciting, investors should not blindly jump in. Here are some important points to keep in mind:
- Past performance ≠ Future guarantee 📉
Just because a fund gave 20–27% returns in the past five years, it does not mean it will repeat the same performance in the next five. - Market Conditions Matter 🌍
Returns can vary depending on macroeconomic conditions, sector trends, and interest rates. - Fund Manager Expertise 🎯
The skill and consistency of the fund manager play a huge role in active funds like these. - Diversification is Key 🧩
Never put all your money into one scheme or category. Always maintain a balanced portfolio across equity, debt, and other asset classes. - Investment Horizon ⏳
These funds are suitable for long-term investors (5+ years) who can handle short-term ups and downs.
📈 Example: How Your Money Could Grow
Let’s understand with a simple example:
- Investment Amount: ₹1,00,000
- Time Horizon: 5 Years
- CAGR: 20%
👉 After 5 years, your investment becomes:
₹2,48,832 (almost 2.5x your money!)
If invested in the ICICI Prudential Dividend Yield Fund at 27.4% CAGR, the same ₹1 lakh would have become ₹3,34,000+. That’s the power of compounding! 🚀
📝 Final Thoughts
Dividend Yield Mutual Funds may not be as popular as large-cap or flexi-cap funds, but they have quietly delivered fantastic returns for long-term investors.
- ICICI Prudential and Franklin India are the top two performers in this category.
- Other funds like Aditya Birla Sun Life, LIC, and UTI have also beaten the 20% CAGR mark.
However, always remember:
👉 High returns in the past do not guarantee high returns in the future.
Before investing, consider:
- Your financial goals 🎯
- Your risk appetite ⚖️
- Guidance from a SEBI-registered financial advisor 👨💼
This way, you can make informed choices and build wealth steadily.
⚠️ Disclaimer
This article is for informational purposes only. Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully and consult a SEBI-registered advisor before investing.