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.
