The Hindu Business Line : Spate of dividends from mutual funds

IT is busy season for dividend strippers even as payouts by equity funds again turn into a talking point in investment circles. The rest of the month and the early days of February are expected to see a number of dividend declarations by leading players, including one from private sector's most heavyweight scheme, Franklin India Bluechip Fund.

Equity products managed by the likes of UTI, HDFC, Birla, Tata and DSP Merrill Lynch are likely to come up with dividends, mostly in the 25-55 per cent range. The idea, expressed by all fund houses without exception, is to reward unitholders, especially the patient ones who have stayed invested for some time.

Some of the schemes that are being talked about in this respect are Franklin India Prima Fund, Birla Advantage Fund, Sundaram Select Focus, HDFC Capital Builder and Tata Select Equity Fund. While the exact size of payout is not known in all cases, a section of distributors have generally started spreading the word.

According to Mr Raghvendra Nath, Head - Strategy & Business Development, Birla MF, dividends are a way of empowering loyal investors. "During the last few months of 2003, many equity funds had made a special effort to pay dividends," he said, adding that the trend is again showing signs of strengthening. He also cited the examples Birla Advantage and Birla Dividend Yield Plus, schemes that have worked out several rounds of dividends in the recent past.

Franklin India Bluechip - which has been in the market for a decade - is also expected to announce a payout in the first week of February. Distributors, however, indicate that the quantum here is expected to be a bit low in comparison with some of the others: 15-20 per cent.

Relatively higher payouts are likely to come from the likes of UTI Growth Sector Fund and Sundaram Select Focus. Among the more regular names in recent dividend lists is Tata Equity Opportunities Fund. It proposed its fifth payout in six months (on January 16). This is a diversified scheme that has paid 21 per cent, 18 per cent, 14 per cent and 12 per cent on the last four occasions arising between August and December 2003.

Some investors have been quick to use dividends as a tax-planning device, admit fund houses. Mr N.K. Sharma, CEO of IL&FS MF, is of the view that this will not prevent mutual funds from coming out with offers. "Our experience shows that genuine investors take dividends in their stride, and not merely see them as one-off opportunities," he stated.