Dividend yield funds outperformed their respective benchmarks by good margin in the one-year period. Average return reported by the six dividend yield funds selling in the last one year is over 40 per cent.

Dividend yield funds invest in stocks of large and mid-cap companies that offer high dividend yields. Dividend yield is considered as high if it is greater than the dividend yield of the Nifty.

According to the data sourced from Bajaj Capital, in the last one-year period, Birla Sun Life Insurance Dividend Yield Fund has reported return of 44.10 per cent as against 18.76 per cent by its benchmark S&P CNX 500 Equity Index 500.

Fortis Dividend Yield Fund reported return of 40.09 per cent as against 14.05 per cent by its benchmark Sensex.

ING Dividend Yield Fund, in the same period, gave a return of 49.97 per cent compared to 19.49 by its benchmark BSE 200. Principal Dividend Yield Fund reported a return of 37.12 per cent as against 18.76 per cent by its benchmark S&P CNX 500 Equity Index 500.

Last one years’ return of Tata Dividend Yield Fund was 41.95 per cent as against 14.05 per cent by its benchmark Sensex and UTI Dividend Yield Fund reported a return of 38.48 per cent compared to 16.98 per cent of its benchmark BSE 100.

Swati Kulkarni, vice-president and fund manager, UTI Asset Management, said, “The idea behind dividend yield funds is to invest in stocks that give good dividends and have good cash flows. However, our main focus is on selecting products with good capital appreciation potential, basically stocks that can increase net asset value of a fund. Our approach is slightly different from other asset management companies. We have been investing in large-cap stocks as valuations for such stocks have moved up.”

Ved Prakash Chaturvedi, managing director, Tata Mutual Fund, said in the last one year, value oriented products have done well. “And dividend yield funds have high value. We generally invest in a mix of large and mid cap stocks which offer high dividends,” Chaturvedi added.