Skip to main content

Mutual Fund Review: UTI Dividend Yield Fund

 

LAUNCHED in May 2005, UTI Dividend Yield Fund has been a slow but steady performer of the mutual fund industry. Despite a poor start in the initial few years of its launch, this scheme has emerged as one of the better ones in the industry. The scheme's increasing popularity is also evident from the steady growth in its assets under management, or AUM, which has grown by more than 70% in the past one year alone. UTI Dividend Yield today commands a respectable size of about 3,000 crore in AUM.

PERFORMANCE:

Though UTI Dividend Yield Fund has been doing fairly well since 2007 — when it first outperformed the broader market indices, namely the Sensex and the Nifty as well as its benchmark index, the BSE-100, by good margins, what marked it out was its ability to curtail the decline in its net asset value (NAV) the very next year. While the global financial meltdown pulled down the returns of major Indian equity indices by over 50% in 2008, the scheme managed to stem the decline to about 44% in the NAV of UTI Dividend Yield Fund. And that too, when equity mutual fund schemes, on an average, had lost about 55% that year.The fortunes of this fund, thus, changed overnight and it shot up the mutual fund ranking charts from being an average performer to a top quartile performer. Since then, there has been no looking back with UTI Dividend Yield delivering consistently.


   Sample this: it returned a whopping 86% gains in 2009 which was more or less at par with the returns of the Sensex, the Nifty and the BSE-100. Again in 2010 — which was marked by extreme volatility — UTI Dividend Yield managed to deliver a decent return of about 24% against the index returns ranging from about 15-17%. In the current calendar year too, while the indices have registered a decline of about 12% so far, UTI Dividend Yield is marginally better placed with a decline of about 10% in its NAV.


PORTFOLIO:

UTI Dividend Yield clearly boasts of a large cap equity portfolio having invested into many of the prime blue-chip equity stocks. However, though this fund is stated to invest in high dividend yielding companies, the same is not really reflected in its current portfolio. Most of the stocks invested into have trailing dividend yield ranging from about 1-4%. The portfolio, thus, mostly resembles the portfolio of any other large-cap equity mutual fund.


   What is noteworthy, however, is the extent of diversification undertaken by the fund manager. The 3,000-crore portfolio is extensively diversified to incorporate some 50 stocks, thereby restricting the exposure per stock to just about 4-5%. The only exception here is Infosys Technologies which currently commands a share of about 7% in the portfolio.


   As far as the holding tenure of the stocks is concerned, this is clearly a long-term investor's portfolio as most of the stocks held by the fund are at least more than a year old. In fact, stocks such as SBI, Birla Corporation, Greaves Cotton, Clariant Chemicals, Tata Chemicals, Marico, Gujarat Mineral Development Corporation, ONGC, Akzo Nobel, NTPC and Indian Oil Corporation are part of the portfolio since 2005. It is hardly surprising then to note that the fund has booked handsome profits on these holdings over a 5-year period. If one were to consider the profit quotient of this fund, currently 78% of the equity portfolio is in the profit zone, indicating that the current market value is higher than the cost of investment.


OUR VIEW:

A large cap focussed portfolio, extensive diversification and an investment strategy to hold the funds for a fairly long time clearly make UTI Dividend Yield an ideal investment for a risk-averse investor. The fund has not only taken cautious bets over a period of time, but has also proved its mettle in both a bullish and bearish market phase. However, it would help if the portfolio had a higher number of high dividendyielding stocks.

 

Popular posts from this blog

Gold: What Can Trigger the Inevitable?

A stronger dollar or rising interest rates could derail the epic yellow metal mania   Before you sell that last piece of jewellery, keep in mind that the gold price will not go up indefinitely. There are number of reasons why it might crash. If you're over weighted in gold or commodities, the warning is the same: A stronger dollar, strengthening US economy or rising interest rates could derail the epic yellow metal mania. Who knows? Congress could even reach an agreement to clear up its balance sheet and pay down its debt. What are the chances of any of this happening? It's beyond the limits of my minuscule, clouded crystal ball, which is about the size of a pin-head.   Nevertheless, you should prepare your portfolio for any number of eventualities, which can be easily accomplished with exchange-traded funds. Gold is troublesome in my book because it really isn't an investment. It's a reserve currency of sorts that's heavily traded by institutional investor...

What is Statutory Liquidity Ratio - SLR?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 What is Statutory Liquidity Ratio - SLR ?   Last week, the RBI cut statutory liquidity ratio ( SLR ) by half a percentage point to 22.5%, effective June 14. By this, the central bank intends to release additional money into the banking system. SLR is the amount of funds that every commercial bank should have either through its holdings in government approved bonds and securities, gold or a combination of these assets. This is another way of ensuring enough liquidity for each bank before they lend to customers. By reducing SLR, the RBI released another half a percentage point of commercial banks' total deposits (in banking parlance, total demand and time liabilities that include FDs, savings and current accounts) to be free ...

7 Things You Should Look for in a Financial Planner

Recently, a new breed of professionals has emerged who are making financial plans for everyone and are not restricting themselves to investment planning. A financial plan includes planning for your taxes, retirement, kids' education and marriage, buying a home, estate planning or any other goals you may have. This new breed of professionals, known as financial planners, writes a plan for you with all your goals specifically laid down and then provides you with a road map on how to achieve these goals. They always give you a holistic account of all your finances, taking into account all your assets and liabilities, besides taking care of all the risks associated with you and your family and also the assets owned by you. These financial planners will first collect all the data related to your finances and the goals you have for future. These goals may be anything ranging from buying a home, to planning for your child's education to going on a vacation. After this exercise of d...

Market Pre-open session - How It works and Its benefits

   With an intention to reduce volatility in various scrips at the opening of the markets, and to arrive at the ideal opening price of a scrip, the exchanges have introduced a call auction process in the pre-open session from October 18.    The pre-open session is a new innovation to arrive at the ideal opening price of a scrip for the current trading session. The session intends to reduce volatility in the beginning of a day. Under this new arrangement, an exchange will collect orders for the first few minutes of this session. On the basis of orders received, it will arrive at the opening price and match the tradable orders to that price. The remaining orders will be moved to the normal trading session.    The call auction process will be initially introduced for scrips forming part of Nifty and Sensex, and trading in other scrips and F&O contracts will only begin at 9:15 am when normal market trading begins. Orders not will get traded during the order entry period in the pre-...

ASBA Option for Initial Public Offer (IPO)

IPO (initial public offering) applicants, particularly the unsuccessful ones, often have to face a double whammy of sorts. On the one hand they fail to get allotment of shares and on the other, they lose out on the interest during the period their money is locked —that is, if they have opted for the traditional method of issuing cheques for depositing the application money. However, if they choose the ASBA (Application Supported by Blocked Amount) facility, they can circumvent this problem. But do note that you cannot decide to make two applications – one by way of cheque payment and the other through ASBA. If you do so, it could be rejected on the grounds that it constitutes multiple applications. Introduced by Securities and Exchange Board of India ( Sebi ) in 2008, using ASBA has become mandatory for all non-retail investors. Retail investors, though, continue to have the option of choosing between the old and new mechanisms. However, it is in your interest to opt for ASBA. He...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now