ATM :: Equity MFs give high payouts on market rally

M Allirajan, TNN | Mar 25, 2015, 12.18AM IST | Times of India
Dividends in mutual fund (MF) schemes are getting bigger. The strong rally in markets has prompted fund houses to offer higher payouts for investors — as high as 85% — with even balanced funds that invest a portion of their corpus in fixed income giving payouts.

Equity-linked savings schemes (ELSSs) have been the most prolific in offering dividends as they compete to garner funds from investors who rush to buy tax-saver instruments just before the close of the financial year to lower their tax burden. As many as ten ELSSs, or tax-saver equity MFs, have declared dividends since early March.

Religare Invesco’s Growth Fund has declared a dividend of Rs 8.5 per unit, or 85%, the highest for the 27-month-old fund. HDFC Taxsaver Fund has offered a dividend of Rs 7 per unit, the highest since 2008. SBI Magnum Taxgain Fund has given a similar payout, which is also the highest in seven years. These funds have gained 50.4-53.2% in the last one year.

“The ability to pay dividends is quite high as there has been a significant increase in NAVs (net asset values) in the last one year,” says Chandresh Nigam, MD & CEO, Axis MF.

Vetri Subramaniam, chief investment officer, Religare Invesco MF, adds, “We have seen good profits and are distributing it to investors. Most funds were not able to pay dividends properly in the last few years because there were no incremental profits.”

In fact, equity MF dividends had dried up between 2010 and 2014 as the markets remained tepid. Several schemes did not pay dividends during this period because they did not have enough incremental profits.

Equity-oriented balanced funds, which have seen strong growth on the back of surging markets, are also rewarding their investors. While Kotak Balance Fund is giving a dividend of Rs 3 per unit, HDFC Balanced Fund is offering Rs 2 per unit. This category of funds has gained 41.1% on an average in the last one year.

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