Apart from being the dividend yield fund with the longest record, the structure of this fund is also likely to work to an investors' advantage. The fund invests only in stocks that offer a dividend yield that is at twice the levels offered by the Sensex basket; most other dividend yield funds try only to better the index dividend yield. This stipulation offers a better cushion to investors seeking to benefit from a dividend yield strategy.
Suitability: Because of its focus on dividend yield stocks, the Birla Dividend Yield Plus is suitable for a conservative investors' portfolio. The portfolio may also offer better downside protection over the long term, than would a plain diversified fund, because each stock in its portfolio is underpinned by its dividend yield. However, dividend yield stocks have not proved particularly resilient to short-term corrective phases.
Performance: The fund has reported returns of about 53 per cent over the past year. This performance aligns more closely with large cap funds, than that of mid-cap funds for this period. Contrary to what one would expect, the fund's portfolio has a decided bias towards large-cap, rather than mid-cap stocks. About 60-65 per cent of the assets have been invested in large cap stocks (stocks with a market cap of over Rs 2,000 crore) over the past year. By June 2005, about 65 per cent of the assets were held in large-caps.
The fund's stock and sector choices within the universe of high dividend yield stocks have also contributed to good performance. Though oil refineries and marketing companies were the top sector position earlier, the fund has sharply pruned its exposures to this sector since then, to about 7 per cent. This is likely to have helped performance at a time when oil stocks have trailed the market.
On the other hand, exposures to FMCG stocks and engineering have been scaled up, also a good decision in hindsight, as both sectors have led the recent rally. Banks remain one of the top sectoral constituents in the portfolio, at 13 per cent, after FMCGs. Hero Honda, ONGC, Vijaya Bank, Ashok Leyland and Century Enka were the top stock holdings by June.
Fund facts: Birla Dividend Yield Plus was launched on March 1, 2003. The fund is managed by Deven Sangoi. The current dividend yield of the portfolio is at 3.8 per cent (June 2005).