NFO Alert: SBI Mutual Fund launches Dividend Yield Fund; all you need to know

SBI Mutual Fund announced the launch of the SBI Dividend Yield Fund, an open-ended scheme, on February 20, 2023. Those looking to invest in opportunities for capital appreciation and/or dividend distribution by investing predominantly in a well-diversified portfolio of equity and equity-related instruments of dividend-yielding companies may park their earnings in this new fund offer (NFO) open till March 06, 2023.

Shamsher Singh, MD & CEO, SBI Mutual Fund, said, “I am happy to announce the launch of SBI Dividend Yield Fund, an offering which provides investors with a diversified mix of high and growing dividend yield companies. As the largest fund house in the country, we continue to add to our bouquet of offerings, and we believe this category has an opportunity to grow and find merit in investors’ portfolios.”

Q. What kind of mutual fund scheme is this?

This is an open-ended equity scheme that would generate long-term capital income by investing primarily in a well-diversified portfolio of equity and equity-related instruments of dividend-yielding companies.

The fund aims to maintain at least a minimum of 65 per cent of the assets in equity & equity-related instruments predominantly in dividend-yielding companies. The fund will also actively look for investment opportunities in companies with relatively lower dividend yields but consistently demonstrated growth in their dividend pay-out. Investors looking to invest in dividend-paying companies with strong growth potential must put their money in this fund.

DP Singh, Deputy MD and Chief Business Officer, SBI Mutual Fund, said, “High dividend yield companies are generally thought of only from the angle of providing regular income, but many of them are strong growth-oriented businesses across market cap with the potential of long-term wealth creation. SBI Dividend Yield Fund presents an opportunity for those looking to invest in such strong businesses with steady cash flows for the long term. Those who invest in direct equity, investors wanting long-term wealth creation and even first-time mutual fund investors will find this fund suitable. Investors who want regular income can use the SWP (A) facility offered in this fund to plan regular tax-efficient cash flows.’’.

However, there can be no assurance that the scheme’s investment objective will be realized.

Q. What is the main objective of investing in this fund?

The idea behind putting your money in this scheme is to earn from the dividends announced on equities and equity-related instruments, benefiting from both dividend earnings and capital appreciation in the long run. Since it is an open-ended scheme, interested investors can put their money into them once the mutual fund house starts allotting units under this scheme.

The funds collected under the scheme shall generally be invested consistent with the objective of the scheme in the following manner.

Q. How may one invest in this fund?

The scheme offers units of Rs. 10 each. Investors can invest under the scheme with a minimum investment of ₹5000 and in multiples of Re 1, thereafter. The additional purchase amount is ₹1000 and in multiples of Re 1, thereafter. There are both regular and direct plans available for investors to choose from.

Investors may opt for a tax-efficient way to receive regular cashflows by registering for SWP (A) Facility (subject to terms & conditions mentioned in the Scheme Information Document) which attracts capital gains as applicable for equity-oriented mutual funds. SWP (A) Facility is a customised facility offered to SBI Mutual Fund investors seeking regular cash flows in a quite simple and tax-efficient manner from their investments. All one has to do is select to withdraw a fixed % of their cost of investment or any specified amount to meet their regular cashflow needs from the various options available (monthly, quarterly, half-yearly and yearly). The SWP (A) facility can be chosen for both the Growth and IDCW plans while the remaining corpus continues to earn returns.

Q. Are there similar mutual funds in the market?

This is not the first time that a dividend yield fund has been introduced to the market. Prior to this, many asset management companies have launched such funds in the past. Some of them include:

Q. How will the scheme benchmark its performance?

The performance of the scheme is measured against the NIFTY 500 TRI (Total Returns Index), India's first broad-based stock market index that contains the top 500 listed companies on the NSE.

Q. Are investors allowed to redeem their mutual fund investments?

No “Entry Load” is applicable pursuant to SEBI Circular No. SEBI/IMD/CIR No.4/168230/09 dated June 30, 2009. However, the fund house may charge an “Exit Load”

• No Exit Load: If units purchased or switched in from another scheme of the Fund are redeemed or switched out up to 10% of the units (the limit) purchased or switched on or before 1 year from the date of allotment.
• No Exit Load:- If units purchased or switched in from another scheme of the Fund are redeemed or switched out after 1 year from the date of allotment
• 1% of the applicable NAV: If units purchased or switched in from another scheme of the Fund are redeemed or switched out in excess of the limit on or before 1 year from the date of allotment.

Q. Who will manage this scheme?

Rohit Shimpi will be managing the equity assets in this scheme while Mohit Jain will be the dedicated fund manager for overseas securities.

Q. Does the fund contain any inherent risk?

The scheme involves “Very High Risk” as per the details mentioned in the Scheme Information Document and is best suited to investors willing to stay invested for a long period. However, investors must consult their financial advisors if in doubt about whether the product is suitable for them.