HDFC Dividend Yield Fund: Will it Yield Steady Returns? - Outside View by PersonalFN

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

HDFC Dividend Yield Fund: Will it Yield Steady Returns?
Dec 2, 2020

Dividend yield is a reliable indicator of a company's valuation. A high dividend yielding stock represents good cash flows from business operations, supports higher return on equity, and the management's commitment towards its shareholders. As a result of higher cash flows, dividend yielding stocks tend to be less volatile and hence, less risky.

The current low interest rate scenario and RBI's accommodative stance bodes well for dividend yielding stocks. Moreover, high dividend yielding stocks are trading at attractive valuations compared to Nifty 50 stocks, thus providing decent investment opportunity.

Hence, HDFC Mutual Fund is of the view that the current economic situation, coupled with attractive stock valuations across broader market, is suited for the launch of HDFC Dividend Yield Fund. The fund will predominantly invest in a diversified portfolio of dividend yielding stocks. It will aim to invest in equities with fair amount of stability and relatively low risk (than other equity funds) over medium to long term.

--- Advertisement ---
We are Bullish on These 3 Little-known Stocks

Our research has uncovered 3 tiny stocks.

You won't hear about these stocks from the mainstream media or your stock broker.

They generally ignore such small size companies.

But our research says, these 3 little-known stocks are set for a massive rally over the coming months and years.

They can potentially offer solid double and triple digit gains to investors.

So, if you are an investor looking to buy good stocks to invest in...when the markets are at all-time high...

Then you must seriously consider these 3 stocks.

You can get the details of these 3 stocks at our free online summit.

We would recommend you to sign-up at the earliest. Because we have limited FREE seats and they are filling up fast.

Click here to sign-up instantly. It's free.
------------------------------

Being a dividend yield fund, HDFC Dividend Yield Fund is mandated to invest minimum 65% of its assets in equity & equity related instruments of dividend yielding companies. The performance benchmark index of the fund is Nifty Dividend Opportunities 50 Total Return Index.

HDFC Dividend Yield Fund is an open-ended equity scheme that will seek to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related securities of dividend yielding companies. However, there is no assurance or guarantee that the investment objective of the scheme will be achieved.

Table 1: Details of HDFC Dividend Yield Fund

Type An Open ended Equity Scheme predominantly investing in dividend yielding stocks Category Dividend Yield Fund
Investment Objective To provide capital appreciation and/or dividend distribution by predominantly investing in a well-diversified portfolio of equity and equity related instruments of dividend yielding companies. However, there can be no assurance that the investment objective of the Scheme will be achieved.
Min. Investment Rs 5,000 and in multiples of Re 1 thereafter Face Value Rs 10/- per unit
Plans
  • Direct
  • Regular

Options
  • Growth
  • Dividend

Entry Load Not Applicable Exit Load - An Exit Load of 1% is payable if Units are redeemed / switched-out upto one year from the date of allotment;

- Nil if Units are redeemed / switched-out after one year from the date of allotment
Fund Manager - Mr Gopal Agarwal Benchmark Index Nifty Dividend Opportunities 50 (Total Returns Index)
Issue Opens: November 27, 2020 Issue Closes: December 11, 2020
(Source: Scheme Information Document)

Investment strategy - HDFC Dividend Yield Fund

HDFC Dividend Yield Fund will primarily invest in equity and equity related instruments of dividend yielding companies (minimum 65% of its assets). It will also invest in companies that choose to buy back shares (an effective mean of rewarding shareholders) in addition to or as an alternative to dividend.

The fund will consider companies that have paid dividend (or done a buyback) in at least one of the three preceding financial years. Apart from trailing dividend yield, the fund manager will consider other factors such as business fundamentals, industry outlook, absolute as well as relative valuations, growth outlook, and corporate governance, while picking stocks.

BREAKING: Full Details of the #1 Investment of the Decade...

The fund will diversify across major industries, economic sectors as well as market capitalisation to reduce the risk of volatility.

Under normal circumstances, the fund's asset allocation pattern will be as under:

Table 2: Asset Allocation of HDFC Dividend Yield Fund
Instruments Indicative Allocation
(% of assets)
Risk Profile
High/Medium/Low
Minimum Maximum
Equity and Equity related instruments of dividend yielding companies 65 100 Medium to High
Equity and equity related instruments of companies other than above 0 35 Medium to High
Non-convertible preference shares 0 10 Low to Medium
Units of REITs & InvITs 0 10 Medium to High
Debt securities, money market instruments, and fixed income derivatives 0 35 Low to Medium
Units of mutual fund 0 20 Low to High
(Source: Scheme Information Document)

The fund has the flexibility to invest up to 35% of its assets in non-dividend yielding companies, units of REITs & InvITs, debt and money market instruments, and units of mutual funds, for diversification.

Who will manage HDFC Dividend Yield Fund?

HDFC Dividend Yield Fund will be managed by Mr Gopal Agarwal.

Mr Gopal Agarwal joined HDFC Mutual Fund as Senior Fund Manager in July 2020. Mr Agarwal has collective experience of 16 years in fund management and 2 years in equity research. He was earlier associated with DSP Investment Managers (India) as Senior Fund Manager and Head - Macro Strategy. He has also served as CIO - Equity at Tata Asset Management Company and has worked as CIO - Equity and Chief Strategist at Mirae Asset Global Investments (India) where he spent nearly a decade.

Mr Agarwal also manages HDFC Equity Savings Fund, HDFC Focused 30 Fund, and HDFC Growth Opportunities Fund.

Fund outlook - HDFC Dividend Yield Fund

HDFC Dividend Yield Fund will invest minimum 65% of its assets in equity & equity related instruments of dividend yielding companies with the flexibility to invest across market capitalization and sectors.

Given the attractive valuations of stocks in the broader markets and favourable dividend yield-to-interest rate ratio, it is a good opportunity to take exposure to Dividend Yield Funds.

Dividend yield funds may perform relatively better during tough market conditions due to better valuations, but may underperform when the market is betting on high growth stocks.

Hence, Dividend yield funds are suitable for investors with moderate to high risk appetite. One should have an investment horizon of at least 5 years before investing in HDFC Dividend Yield Fund.

If you wish to select worthy mutual fund schemes, subscribe to PersonalFN's unbiased premium research service, FundSelect. Each fund recommended under FundSelect goes through our stringent process, where funds are tested on both quantitative as well as qualitative parameters.

Every month, PersonalFN's FundSelect service will provide you with insightful and practical guidance on equity mutual funds and debt schemes - the ones to Buy, Hold, or Sell.

And on the occasion of 20 years of our unbiased research service, we bring to you this Special Anniversary Offer. Subscribe now!

Author: Divya Grover

This article first appeared on PersonalFN here.

Join Now: PersonalFN is now on Telegram. Join FREE Today to get 'Daily Wealth Letter' and Exclusive Updates on Mutual Funds

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "HDFC Dividend Yield Fund: Will it Yield Steady Returns?". Click here!

  

More Views on News

Great vs Good: Which Stock Will Win in 2021? podcast (Views On News)

Jan 22, 2021

Rahul Shah discusses which group of stocks performed the best in 2020 and its implications for your portfolio.

One Chart to See Before You Sell (Fast Profits Daily)

Jan 22, 2021

In this video, I'll show you a crucial chart that you need to check before you decide to sell any stock or index.

SBI Small Cap Fund: Discovering Multi-bagger Ideas (Outside View)

Jan 22, 2021

PersonalFN's analysis on the features and performance of SBI Small Cap Fund.

How to Invest in Smallcap Stocks in 2021 and Beyond (Profit Hunter)

Jan 22, 2021

Here's why I believe there is a lot more steam is left in the smallcap rally.

You and Me (Fast Profits Daily)

Jan 21, 2021

An inside look into what happens behind the scenes in my trade recommendations.

More Views on News

Most Popular

Why Gold Hit Lower Circuit (Fast Profits Daily)

Jan 11, 2021

Were you shocked that bullion prices hit lower circuits on Friday on the MCX? Find out why it happened...

Time to Book Profits in Pharma Stocks (Fast Profits Daily)

Jan 15, 2021

In this video, I'll show you why it might be the right time to take money of the table in pharma stocks.

A Rare Chance to Invest in Potential Multibaggers in 2021 (Profit Hunter)

Jan 11, 2021

Our ace stock picker is ready to capitalise on a big growth opportunity.

Smallcap Stocks: Your Best Bet for 2021 and Beyond (Profit Hunter)

Jan 15, 2021

The pandemic failed to thwart Richa's investing success formula for 2020.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Jan 22, 2021 (Close)

MARKET STATS