NTH :: Equity MFs start doling out dividends

M Allirajan, TNN | Nov 29, 2013, 02.14AM IST| Times of India
With the markets recovering lost ground, equity mutual funds (MFs) have started to dole out dividends. As many as seven equity schemes would be paying dividends to investors within the next two days.

However, fund houses are cautious about the extent of the payout. They are giving dividends ranging from 80 paise (8%) to Rs 2 per unit (20%). Several funds that have declared dividends now have only generated single-digit returns in 2013.

Though the markets have done well in the last three months, their performance so far this year has been quite patchy. While the sensex and Nifty have surged 13.6% and 14.6% respectively in the past three months, they have advanced by just 7.3% and 4.8% so far in 2013.

Popular equity funds have surged 14%-18.8% in the last three months enabling fund houses to recover losses made earlier in the year. “The performance in the last three months has helped fund managers to give at least 7%-8% dividend,” said a top official with a leading fund house.

“We are sitting on some profits as the markets have performed well. We want to reward investors as it would help in attracting them to equity schemes,” said Gopal Agrawal, chief investment officer, Mirae Asset Global Investments India.

“We usually give dividends whenever there is a distributable surplus,” said A Balasubramanian, CEO, Birla Sun Life MF. “The market recovery would help in increasing the dividend rates,” he said.

Dividend announcements usually gather steam at the close of the financial year. A large number of equity funds declare payouts during this period to sustain the interest of existing investors and gain the confidence of prospective clients.

Fund houses, which typically pay dividends in equity schemes at least once in every year, have either maintained or lowered payouts in most cases now as the overall performance so far this year has not been exceptional. While large-cap equity MFs advanced 2.4% so far in 2013, most popular fund categories including diversified equity MFs are still languishing in the red this year.

Many funds had offered high dividends in the past even if the market conditions were bad just to lure investors. As a result, their net asset values fell sharply.

This prompted market regulator Sebi to stipulate in 2010 that dividends should be offered only from actual realised gains and not from the unit premium reserve. This had a sobering effect on payouts with the quantum of dividend dropping when the market conditions turned bad.

Source : http://goo.gl/1wXoSB

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