SBI Mutual Fund has launched a Dividend Yield Fund NFO, which will start offering on the 20th.th February 2023 The SBI Dividend Yield Fund primarily invests in dividend yielding stocks with the aim of increasing principal and providing regular income. Dividend Yield Funds have delivered annualized returns of 9% to 14% over the past five years.should you invest in SBI Dividend Yield Fund NFOWhat are the risk factors an investor should consider before investing in such a fund?
Also Read: ValueResearch 5 Star Rated Mutual Fund
What is a dividend yield fund?
As the name suggests, dividend yield funds invest in dividend yield stocks. Their main motto is to provide capital appreciation by providing regular income.
SBI Dividend Yield Fund NFO – Issue Details
This is an open ended mutual fund. Here are the details of the NFO issue:
| The scheme will open | February 20, 2023 |
| scheme close | March 6, 23 |
| Schemes for continuous purchases/sales are reopened | Within 5 business days |
| Minimum amount | 5,000 rupees |
| Minimum SIP | Rs 500 for 12 months |
| Fund’s NAV | Rs 10 during NFO period |
| entry road | none |
| exit road | 1% if you redeem more than 10% within 365 days |
| dangerous | very high risk |
| standard | Nifty 500TRI |
| fund manager | Mr. Rohit Simpi Mr Mohit Jain |
| Maximum TER | 2.25% |
SBI Dividend Yield Fund SID Prospectus Link
SBI Dividend Yield Fund NFO – Investment Objective
The scheme seeks to provide investors with opportunities for capital appreciation and/or dividend distributions by investing primarily in well-diversified portfolios of stocks and equity-related products of dividend-yielding companies.
However, there is no guarantee that the investment objective of the scheme will be achieved..
What is the allocation pattern for this mutual fund scheme?
| instrument type | min % | Max % | risk profile |
|---|---|---|---|
| stocks and stock-related products of Dividend Yield Companies (Including) equity derivatives) |
65% | 100% | expensive |
| Other stocks and stock-related products | 0% | 35% | expensive |
| Bonds (including securitizations) liabilities and debt derivatives) and money market instrument |
0% | 35% | low to medium |
| Investment units issued by REITs and InvITs | 0% | Ten% | medium to high |
Performance of existing dividend yield mutual funds
Let’s take a look at the performance of existing dividend yield funds.
| scheme name | 3 years old | 5 years old | 10 years old |
|---|---|---|---|
| Templeton India Equity Income Fund | 25.0% | 14.0% | 15.0% |
| Sundaram Dividend Yield Fund | 17.0% | 11.6% | 14.0% |
| ICICI Prudential Dividend Yield Equity Fund | 25.9% | 11.6% | – |
| UTI Dividend Yield Fund | 17.4% | 11.3% | 12.7% |
| Aditya Birla Sun Life Dividend Yield Fund | 19.6% | 9.7% | 12.4% |
| IDBI Dividend Yield Fund | 16.4% | – | – |
Why should I invest in SBI Dividend Yield Fund NFO?
Here are some reasons to invest in such schemes.
1) These funds offer a higher investment yield as they primarily invest in quality funds that offer higher dividend yields.
2) Relatively low risk as it mainly invests in large-cap stocks with a track record of dividends.
3) Dividend Yield Funds have generated annualized returns of 9% to 14% over the last 5 years and 12% to 15% over the last 10 years. This shows consistent performance in this category.
Key risk factors to consider before investing in such funds
You should consider some of these risk/negative factors before investing.
1) Dividend funds invest in dividend yield stocks. Such stocks may offer high dividends, but the price appreciation rate of such stocks may be low compared to other stocks.
2) Invest in around 35% debt instruments where there are interest rate risk, liquidity risk and default risk.
3) Invest in high-risk InvITS and REITs
4) Investors should read the NFO prospectus for full risk factors.
Also Read: Stocks that pay the highest dividends as their prices rise
Should I invest in SBI Dividend Yield Fund NFO?
The SBI Dividend Yield Fund invests in dividend yield stocks. Such funds primarily pick stocks from the blue chip category, which are considered relatively safe investment options. Funds in this category have delivered annualized returns of 9% to 12% over the past five years.
On the other hand, there is no guarantee that such dividends will be paid by so-called blue chip companies. Funds in this category have historically produced lower returns compared to other equity funds (pre-Corona).
Medium to high risk investors can invest in this fund. If you don’t want to test with new funds, you can invest in the high dividend yield funds mentioned above.
If you like this article, please share it on Facebook or Twitter. This will be a special gift you give to our blog.
Suresh KP is the founder of Myinvestmentideas. He is his NISM Certified – Investment Advisor and NISM Certified – Research Analyst. He has been analyzing financial markets for the past 20 years.
