Mutual Funds

UTI Dividend Yield Fund: Invest

K. Venkatasubramanian | Updated on March 12, 2011

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Investors can buy units of UTI Dividend Yield Fund (UTI Dividend), given its long-term track record of delivering steady returns. Over one-, three- and five-year time frames, the fund has managed to outpace its benchmark – BSE 100.

The compounded annual return generated by the fund over five years , at 16.5 per cent, places it among the top-quartile of diversified equity funds. This is also higher than peers such as Birla Sun Life Dividend Yield Plus and Principal Dividend Yield in the short term.

UTI Dividend predominantly takes exposure to large-cap stocks, while also taking relatively higher dividend yielding stocks from the mid-cap pack.

The fund contains downsides well during market falls and manages to deliver as much as its benchmark when markets race ahead. It is, therefore, more suitable for conservative investors.

The fund would be an ideal choice during periods marked by high volatility such as the present one, when even blue-chip stocks witness steep declines.

Investors can consider accumulating units through SIPs to average costs.

Performance and strategy: During periods when markets correct significantly, the fund manages to contain downsides much better than its benchmark. During early 2007, in the protracted correction of 2008-09 and even in the recent fall over the last few months, UTI Dividend Yield managed to contain erosion in its NAV to the tune of 2-14 percentage points better than the BSE-100.

When markets are on an upswing, such as those witnessed in late 2007 and in the rally that started from March 2009, the fund managed to match the returns of its benchmark.

The fund moved into deposits and cash to the tune of nearly 30 per cent of its portfolio during the heavy market fall of 2008-09, which mitigated the erosion in its NAV.

Even during periods of upswings in the markets, the fund remains invested in equity only to the tune of about 90-92 per cent, suggesting a conservative approach.

Banks and software have always figured among the top sectors held by the fund. In late 2009 and early 2010, the fund had significant exposure to automobile and consumer non-durable sectors, which helped it gain from the substantial rallies that these sectors witnessed.

Cement, oil and gas and fertilisers — sectors that typically have stocks that offer high dividend yields — besides mid-cap stocks in these sectors figure in the portfolio. With about 50 stocks in its portfolio, UTI Dividend Yield provides ample diversification.

Published on March 12, 2011

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