The onset of summer has brought some solace to investors as the broad-based S&P BSE Sensex has bounced back, making up most of its losses since the beginning of this year. While over a longer one-year period the Sensex is still down almost 7 per cent, all dividend yield funds have fallen less.

One of the many attributes used by equity fund managers to identify fundamentally strong companies is dividend yield. Companies with consistent dividend payouts but quoting at a reasonable price fall in this category. They tend to be relatively inexpensive to their peers who skimp on dividends, making them prime candidates for stock selection. Seven fund houses have schemes with the dividend yield theme, most of them have a track record of over five years.

Performance

The top three performing funds have delivered more or less similar returns over the past year.

BNP Paribas Dividend Yield topped the list having lost less than a per cent over the last year. Its equity holdings over the year were maintained between 95 and 97 per cent; the fund portfolio is largely tilted towards large-caps, with holdings ranging between 75 and 82 per cent.

The fund invests in stocks that have a dividend yield of over 0.5 per cent which is lower than that of its peers.

This offers the fund a wider basket to invest in, albeit with the possibility of lower returns.

Tata Dividend Yield Fund came in at the second spot, falling around 1.4 per cent. Over the year, the fund held an average of 65 per cent exposure to large caps, 15 per cent to mid-caps and 20 per cent to small-caps. As of March 2016, there has not been much variation in the composition of its portfolio. The scheme did not take large cash positions, with equity exposure remaining between 95 per cent and 98 per cent over this period. Its two large sector holdings are in software (23 per cent) and banks (15 per cent). Top stocks in its kitty are HDFC Bank and HCL Technologies which are also good dividend paying companies.

The fund invests at least 70 per cent in stocks having a dividend yield higher than that of the Sensex (1.49 per cent).

ICICI Prudential Dividend Yield Equity Fund was ranked third. Launched in May 2014, it fell 2.2 per cent in the last one year. Even as markets remained volatile, it stayed fully invested in the market with equity holdings ranging between 94 and 97 per cent over the year.

Over the last one year, the fund had an average of 66 per cent exposure to large-cap stocks, 11 per cent to mid-cap and the remaining 23 per cent to small-cap stocks. The fund invests at least 80 per cent in stocks having a dividend yield higher than that of Nifty 50 (1.49 per cent). Between March 2015 and 2016, the fund held around 40 per cent in two sectors - banks (28 per cent) and software (12 per cent).

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