You might have heard that investing in dividend mutual funds is a good idea.

And they are mostly meant for individuals who want a regular income through mutual funds.

But which funds do you think are the best for your investment objectives?

Sometimes, mutual fund investors prefer an intermittent cash flow from their investments to cater to some inevitable expenses.

This is when they opt for a dividend mutual fund.

Let’s look at what dividend mutual funds are and the top picks for 2018.

What are Dividend Mutual Funds?

Dividend-paying mutual funds refer to equity-oriented mutual funds that mainly invest in organizations that pay dividends.

Dividends refer to profit that is earned by companies and this profit is shared with the shareholders of the company.

The profit is nothing but the yield that mutual funds get by selling the shares at prices higher than what it was purchased for.

Depending on the scheme, the fund manager can either declare a dividend or use the profit to purchase stocks.

When you choose an equity oriented mutual fund that offers dividends, you can enjoy maximum profitability which will result in excellent growth for your funds.

The Asset Management Company can choose to pay dividends daily, monthly, quarterly or annually. This generally varies from one scheme to another.

Even though most dividend mutual funds strive to pay dividends to investors, it is never guaranteed.

How Do Dividend Mutual Funds Work?

Dividend mutual funds provide investors annualized pay-outs. These pay-outs are made on a regular basis and hence, as an investor, you feel safe to invest in these funds.

Also, dividend obtained from mutual funds are tax-free.

However, fund houses pay a dividend distribution tax (DDT) of 28.84% for debt funds. This amount is however inclusive of surcharge and cess.

On the other hand, the finance minister has introduced 10% tax on equity mutual fund dividends.

It was in line with the introduction of 10% on long-term capital gains on equity mutual funds.

Also Read: Growth or dividend reinvestment option: Which is better for you?

20 Best Dividend Paying Mutual Funds

 Here is the list of top 20 Mutual fund with dividend plan: 

S.No Mutual Fund Scheme Fund Category NAV (31st, August 2018) Latest Dividend date Dividend (₹/Unit) Dividend Yield

 (3 years)

1 DSP BlackRock Equity Opportunities Fund – Direct – Dividend Large and Mid Cap Fund ₹ 56.22 06-01-2017 4.50 9.61%
2 Canara Robeco Emerging Equities – Direct – Dividend Large and Mid Cap Fund ₹ 67.90 24-11-2017 3.00 4.82%
3 Principal Emerging Bluechip Fund – Direct – Dividend Large and Mid Cap Fund ₹ 90.4 15-12-2017 5.92 18.34%
4 L&T Midcap Fund – Direct – Dividend Mid Cap Fund ₹ 48.90 17-08-2018 3.54 5.06%
5 Sundaram Large and Mid Cap Fund – Direct – Dividend Large and Mid Cap Fund ₹ 237.30 01-01-2018 3.30 8.95%
6 SBI Smallcap Fund – Direct – Dividend Small Cap Fund ₹ 41.00 09-03-2018 9.10 9.08%
7 Reliance Small Cap Fund – Direct – Dividend Small Cap Fund ₹34.4 08-02-2018 3.00 4.36%
8 Kotak Standard Multi Cap Fund – Direct – Dividend Multi Cap Fund ₹25.0 20-03-2018 2.00 4.91%
9 HDFC Small Cap Fund – Direct – Dividend Small Cap Fund ₹31.4 22-03-2018 2.75 8.25%
10 Aditya Birla Sun Life Small Cap Fund – Regular – Dividend Small Cap Fund ₹ 23.60 30-08-2018 1.31 6.30%
11 UTI Equity Fund – Direct – Dividend Multi Cap Fund ₹ 111.90 23-08-2018 2.92 2.54%
12 Mirae Asset India Equity Fund – Direct – Dividend Multi Cap Fund ₹ 37.60 12-03-2018 2.00 11.01%
13 SBI Magnum Multi Cap Fund – Direct – Dividend Multi Cap Fund ₹ 26.00 09-03-2018 2.20 13.80%
14 Aditya Birla Sun Life Equity Fund – Direct – Dividend Multi Cap Fund ₹ 139.50 09-03-2018 0.80 8.43%
15 Motilal Oswal Long Term Equity Fund – Direct – Dividend ELSS ₹ 17.40 20-03-2018 0.10 10.14%
16 Invesco India Tax Plan – Direct – Dividend ELSS ₹23.7 12-01-2018 2.20 9.41%
17 HDFC Equity Savings Fund – Direct – Dividend Equity Savings Fund ₹ 12.20 25-06-2018 0.22 5.74%
18 Indiabulls Arbitrage Fund – Direct – Dividend Arbitrage Fund ₹10.5 21-06-2018 0.05 5.75%
19 Reliance Arbitrage Fund – Direct – Dividend Arbitrage Fund ₹ 10.90 28-08-2018 0.04 5.58%
20 SBI Equity Savings Fund – Direct – Monthly Dividend Equity Savings Fund ₹ 12.40 31-08-2018 0.04 4.96%


Many investors are putting money into the dividend option of mutual funds. Cash flows from their investments help manage expenses.

Most financial planners recommend dividend option for investors who need a regular stream of cash flow.

Those looking to build wealth over the long term through equity mutual funds should opt for the growth option.

This is because the compounding benefit is lost when a dividend is paid. Unless the amount is invested immediately in a higher yielding asset.

So, dividend mutual funds are ideal for investors who do not have an appetite for risk and who wish to receive regular pay-outs as a source of income.

But remember, there are a lot of factors you should look at before selecting a mutual fund scheme that matches your investment goal.

Mutual fund investors in India may disagree on strategies and fund choices but one of the few things that most would agree on is the fact that investing for the long-term is an ideal method to maximize potential gains.

Hence, analyse your goals and risk appetite and invest accordingly.

Investing in mutual funds online is very simple and paperless. Simply log in to your Groww account, choose a fund, and invest using net banking – exactly like you would when shopping online!

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww


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