Top Dividend Paying Equity Mutual Funds

Just like stocks even mutual funds do provide dividends and the best schemes hold securities in their portfolio that frequently pay dividends. Dividends are profits shared by the companies, which are then paid even by mutual funds. There are 4 top performing good dividend paying mutual funds.

What is a dividend paying mutual fund?

A dividend-paying mutual fund is an equity mutual fund that invests primarily in organizations that gives regular dividends. Dividends refer to profits or earnings generated by a company. For a mutual fund the profits are earned even when a fund manager sells a stock at a higher price than the buying price.

Fund managers of dividend paying mutual funds choose stock of companies that offer regular payments. The core objective of such mutual funds is to generate extra income and thus maximum profitability. So the strategies used while creating a mutual fund has to align with the objective. However the payment of dividend is not guaranteed though and subject to market trend.

Mutual fund investors have an alternate option to invest besides growth called as dividend. Under the dividend option, an investor gets regular income in form of dividends which the scheme pays out periodically. The dividend pay out is done from the net asset value (NAV) of the scheme and after it is paid NAV drops. A net asset value in mutual funds is the price of each unit at which it is purchased.

Benefits of investing in dividend paying mutual funds
The advantage of investing in these funds are:

• Funds offer regular upcoming dividends in mutual funds.
• Most of the companies held in the portfolio are largely immune to market movements.
• Potentially generate high investment returns over the long term.
• Has the ability to reduce market volatility.

The dividend payouts are usually made on a regular basis and therefore, an investor feels safe and secure with these funds. These dividends will be paid from the revenues earned by the scheme during the previous year. So, the risk-aversive and first-time investors who seek regular income can consider investing in these dividend paying mutual funds.

Here top 4 performing funds that pay good dividends.

The returns and dividend details are taken for direct IDCW plans from Valueresearch

Taxation on Dividend of mutual funds
The dividend income is taxable along with the capital gains in the hands of the investors. The income is taxable under the heading of 'Income From Other Sources' as per the applicable income tax slab rate for the financial year. Additionally, the distributor of dividend income has to deduct, tax deducted at source (TDS) at a rate of 10%. However, TDS is not deducted if the total dividend paid by the distributor during the financial year is less than Rs 5,000. But if an investor fails to provide the PAN to the distributor, he will deduct TDS at a rate of 20%.

Disclaimer
Mutual fund investments are subject to market risk. The above-mentioned information is purely informational and doesn't guarantee any return. Greynium Information Technologies and the Author are not liable for any losses caused as a result of a decision based on the article.