Top Mutual Funds: Dividend Yield Funds Giving 20%+ Annualised Returns in 5 Years

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:

✨ 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:

1. 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.
2. Market Conditions Matter 🌍
   Returns can vary depending on macroeconomic conditions, sector trends, and interest rates.
3. Fund Manager Expertise 🎯
   The skill and consistency of the fund manager play a huge role in active funds like these.
4. 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.
5. 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.