Mutual Funds

Birla Sun Life Dividend Yield Plus : Invest

Srividhya Sivakumar | Updated on March 05, 2011

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With the markets likely to remain volatile for some more time to come, dividend yield funds would make a good addition to the fund portfolios of risk-averse investors. Birla Sun Life Dividend Yield Plus (Birla Dividend) fits the bill well, given its long track record of consistent performance and well-diversified portfolio.

While peer funds such as ING Dividend Yield and UTI Dividend Yield too look promising, Birla Dividend scores in terms of its better spread out portfolio, both in terms of sector as well as stock weights. The fund has consistently bettered its benchmark S&P CNX 500 over one-, three- and five-year time-frames. Investors can therefore accumulate units in this fund through a Systematic Investment Plan (SIP).

Suitability: Dividend yield funds do well during periods of volatility and market correction, as evidenced by their performance in the last two years. Their performance during secular bull runs, though, tend to lag that of diversified funds.

In the case of Birla Dividend too, while the performance during periods marked with volatility and corrections is impressive, its returns during secular bull rallies has been somewhat restrained, making it better suited for conservative investors, primarily looking for steady returns. The fund would also make a good diversification option for others.

Performance: Birla Dividend has delivered 15 per cent, 16 per cent and 15 per cent over a one, three and five-year periods respectively. This is largely in line with peer funds ING Dividend Yield (16 per cent, 15 per cent and 16 per cent) and UTI Dividend Yield (15 per cent, 14 per cent and 17 per cent). The fund has also outperformed CNX 500 and Nifty by comfortable margins over these time periods.

That Birla Dividend has done reasonably well even during market corrections is an extra factor in its favour. During periods of market falls, such as the ones in 2004 and 2006 as well as the protracted slide in 2008-09, the fund managed to limit its losses better than its benchmark.

A well-diversified portfolio also adds to the fund's strength. Unlike ING Dividend and UTI Dividend, its portfolio is fairly spread out, with top 5 holdings accounting for 14 per cent of its portfolio as against 23 and 25 per cent in the former two. Its sector weights are also reasonably diversified, with the top 3 making up about 40 per cent of its portfolio. With market fancies for sectors changing with each market cycle, a well-diversified portfolio shields the fund relatively well from specific sector volatility.

Portfolio: The fund has consistently maintained a multi-cap approach, with a higher weight to mid-cap stocks. Over the last year, the fund benefited immensely from appreciation in stocks such as Hindustan Unilever, Tata Chemicals, Jagran Prakashan, J&K Bank and Chambal Fertilisers.

Its current portfolio, however, is tilted more towards large- and small-cap stocks (37 per cent and 33 per cent respectively), with stocks from sectors such as energy, financials and FMCG figuring prominently in it.

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Published on March 05, 2011
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