Dividend yield funds: Quality investment portfolio is key, say experts

Restrictive mandate can result in these schemes missing out on good opportunities

After giving negative returns (category average -7.9 per cent) in 2018 and meagre returns (3.6 per cent) in 2019, the dividend yield category has bounced back.

Its one-year category average return currently stands at 66.6 per cent. Before committing money to these funds based on past returns, investors need to understand their nature and potential risks.      

Where do they invest?

Dividend yield of the stocks these funds pick must be higher than a threshold level. “We look for good current dividend yield, earnings growth, and free cash flow generation,” says Swati Kulkarni, executive vice-president and fund manager, UTI