Summary
Dividend-paying mutual funds are invested in companies with an established track record of paying dividends and providing long-term capital appreciation.
Based on AUM as of 4 August 2026, the leading dividend-yield funds in this list are SBI Dividend Yield Fund, ICICI Prudential Dividend Yield Equity Fund and HDFC Dividend Yield Fund.
Tata Dividend Yield Fund recorded the highest 1-year return at 14.80%, while LIC MF Dividend Yield Fund had the highest 3-year CAGR at 20.73%.
All 10 funds carry a Very High risk rating, and dividend or IDCW payouts are not guaranteed every month.
Dividend-yield funds are funds that focus on companies that provide dividends to their investors. Although the dividend payouts are not guaranteed, the funds allow investors to either reinvest the dividends in the growth option or redeem the received dividends, realised gains, or a fraction of capital as per the IDCW option, which lowers the NAV by the amount distributed.
Best 10 Monthly Dividend-Paying Mutual Funds: Quick Comparison
The following is a list of the best dividend-paying mutual funds, ranked by their asset under management (AUM), as of 4 August 2026 (08:00 AM IST):
| Name | AUM(₹ crore) | TER | NAV(₹) | MinimumSIP(₹) | 1-Year Absolute Returns (%) | 3Y CAGR(%) | 5Y Benchmark Return(%) | Risk |
| SBI Dividend Yield Fund | 8,309.93 | 1.12 | 16.53 | 5000.00 | 9.39 | 13.54 | – | Very High |
| ICICI Pru Dividend Yield Equity Fund | 6,692.59 | 0.75 | 61.54 | 5,000.00 | 7.03 | 19.15 | 19.26 | Very High |
| HDFC Dividend Yield Fund | 5,655.56 | 0.85 | 27.44 | 1,500.00 | 5.59 | 14.26 | 15.96 | Very High |
| UTI Dividend Yield Fund | 3,697.48 | 1.46 | 195.86 | – | 4.78 | 15.81 | 12.91 | Very High |
| Franklin India Dividend Yield Fund | 2,285.23 | 1.35 | 153.06 | – | 4.04 | 13.78 | 13.80 | Very High |
| Aditya Birla SL Dividend Yield Fund | 1,436.81 | 1.36 | 513.18 | – | 8.43 | 15.61 | 14.43 | Very High |
| Tata Dividend Yield Fund | 1,068.11 | 0.76 | 21.77 | 150.00 | 14.80 | 16.78 | 15.19 | Very High |
| Sundaram Dividend Yield Fund | 830.10 | 1.20 | 148.26 | – | 2.74 | 12.67 | 11.48 | Very High |
| LIC MF Dividend Yield Fund | 718.28 | 0.95 | 36.15 | – | 10.71 | 20.73 | 16.93 | Very High |
| Baroda BNP Paribas Dividend Yield Fund | 613.16 | 1.31 | 10.22 | 500.00 | 7.41 | – | – | Very High |
Top 10 Monthly Dividend-Paying Mutual Funds in India
The following section provides an individual analysis of each selected dividend-yield mutual fund:
SBI Dividend Yield Fund
SBI Dividend Yield Fund is an open-ended equity scheme that invests primarily in dividend-yielding companies across sectors and market capitalisations. It has the highest AUM of ₹8,309.93 crore, indicating strong investor participation. According to the above comparison data as of 4th August 2026, the fund has a current NAV of ₹16.53 and a minimum SIP of ₹5000.
ICICI Pru Dividend Yield Equity Fund
ICICI Prudential Dividend Yield Equity Fund follows a diversified investment strategy by selecting companies with sustainable dividend-paying records alongside strong business fundamentals. Based on the comparison data, it manages ₹6,692.59 crore in assets, has one of the lowest expense ratios of 0.75%, and delivers strong 3-year and 5-year returns of 19.15% and 19.26%, making it attractive for long-term investors.
HDFC Dividend Yield Fund
HDFC Dividend Yield Fund primarily invests in companies that have paid dividends or undertaken buybacks in at least one of the previous three financial years. The scheme has an AUM of ₹5,655.56 crore, with an expense ratio of 0.85% and NAV of ₹27.44. The fund offers a minimum SIP of ₹1,500 with 15.96% returns over 5 years.
UTI Dividend Yield Fund
UTI Dividend Yield Fund is among the oldest schemes in this category, having been launched on 3 May 2005. The fund focuses on quality businesses with sustainable dividend-paying ability across sectors and market capitalisations. The fund had a month-end AUM of ₹3,697.48 crore and 12.91% returns over 5 years. It has the highest expense ratio of 1.46% compared to the listed funds.
Franklin India Dividend Yield Fund
Franklin India Dividend Yield Fund, formerly Templeton India Equity Income Fund, follows a value-oriented investment philosophy by investing in companies offering attractive dividend yields and long-term growth potential. The comparison data shows an AUM of ₹2,285.23 crore, an expense ratio of 1.35%, a NAV of ₹153.06, and a 3-year CAGR of 13.78%. It indicates lower performance compared to a high expense ratio.
Aditya Birla SL Dividend Yield Fund
Aditya Birla Sun Life Dividend Yield Fund primarily invests in dividend-paying companies with relatively high dividend yields and maintains diversification across sectors. Its benchmark comprises the Nifty 500 TRI and Nifty Dividend Opportunities 50 TRI. Based on the comparison above, the fund has a 3-year CAGR of 15.61% and a 5-year CAGR of 14.43%. The high expense ratio of 1.36% may impact the overall net returns on the funds.
Tata Dividend Yield Fund
Tata Dividend Yield Fund aims for long-term capital appreciation by investing predominantly in dividend-yielding companies with sustainable earnings and attractive valuations. The fund manages ₹1,068.11 crore and has delivered a 1-year return of 14.80%, with a 3-year CAGR of 16.78% and a 5-year CAGR of 15.19%. The fund is made easily accessible with a minimum SIP investment of ₹150, but the low AUM indicates a relatively smaller asset base and investor participation.
Sundaram Dividend Yield Fund
Sundaram Dividend Yield Fund invests in companies with healthy cash flows, stable earnings and sustainable dividend distribution records. According to the comparison table, the scheme has an AUM of ₹830.10 crore, an expense ratio of 1.20%, an NAV of ₹148.26, a 3-year CAGR of 12.67% and a 5-year CAGR of 11.48%. Its historical returns are comparatively lower than the other listed funds.
LIC MF Dividend Yield Fund
LIC MF Dividend Yield Fund aims to generate long-term capital appreciation while investing predominantly in dividend-yielding companies. The fund manages an AUM of ₹718.28 crore, with an expense ratio of 0.95%, a NAV of ₹36.15, a 3-year CAGR of 20.73% and a 5-year CAGR of 16.93%. It has recorded the highest 3-year returns amongst the other funds, but the low AUM represents lower investor participation and a small asset base.
Baroda BNP Paribas Dividend Yield Fund
Baroda BNP Paribas Dividend Yield Fund is one of the newer schemes in the category and focuses on building a diversified portfolio of companies with sustainable dividend-paying capacity. The fund has an AUM of ₹613.16 crore, an expense ratio of 1.31%, an NAV of ₹10.22, and a 1-year absolute return of 7.41%. It has one of the lowest minimum SIP investments of ₹500, allowing investors to access the funds without a huge capital requirement.
How We Selected These Monthly Dividend-Paying Funds?
The dividend-paying mutual funds are selected based on certain metrics and measurements.
- Assets Under Management (AUM): AUM shows the level of investor participation in the fund. Higher AUM indicates better performance, liquidity, and greater investor participation.
- Expense Ratio (TER): The expense ratio is the fee charged by fund houses for maintaining the investors’ fund. Since it directly impacts returns, a lower expense ratio can improve overall returns by lowering overall costs.
- Historical performance: The fund’s past performance shows the absolute returns earned in 1 year along with 3-year and 5-year CAGR to display the consistency of the fund’s performance.
- Minimum SIP Requirement: SIP is the periodic investment strategy where investors can invest a small amount of money at regular intervals. The minimum SIP requirement shows the accessibility of the fund to investors.
Monthly Dividend-Paying Funds vs Other Fund Categories
The difference between monthly dividend-paying funds and other funds is listed below.
| Basis | Dividend-Yield Fund | ELSS Fund | Debt Mutual Fund |
| Primary Objective | Capital Appreciation through companies with strong dividend-paying potential | Wealth creation with tax benefits | Stable income and capital preservation |
| Investment Portfolio | Stocks of companies with consistent dividends | Primary equity stocks | Bonds, treasury bills, and other fixed-income instruments |
| Return | Moderate to high | High | Low to moderate |
| Suitable for | Investors seeking equity exposure with a focus on dividend-paying companies | Investors aiming for tax benefit under Section 123 of the Income-Tax Act 2025 | Conservative investors seeking relatively stable returns |
Benefits and Risks of Monthly Dividend-Paying Mutual Funds
The benefits of dividend-paying mutual funds are mentioned below.
- Exposure to Quality Companies: Dividend-yield mutual funds tend to focus on financially sound companies that have consistently paid regular dividends in the past.
- Long-term Wealth Creation: Investors can maintain the fund and benefit from long-term wealth creation apart from regular fixed income. Investors who aim to invest for a longer period can opt for these funds.
- Diversified Portfolio: These funds allow investors to gain exposure to multiple sectors or segments of the market. This minimises the risk arising out of the underperformance of any individual stock.
- Professional Management: Experienced fund managers make the selection and allocation of funds efficiently and monitor them to check for any necessary adjustments.
The risks associated with dividend-paying mutual funds are mentioned below.
- No Guaranteed Monthly Returns: In contrast to the name, the mutual funds do not promise any guaranteed dividends on a monthly basis. However, dividends/IDCW payouts are distributed when there is distributable surplus, and the fund house declares them as per the IDCW plan.
- Market Risk: Being an equity mutual fund, the funds are directly affected by market fluctuations, impacting the overall fund performance and dividend yield.
- Dividend Policy changes: Companies may decide to reduce or eliminate dividend payments during weak financial performance or an economic crisis, directly affecting its overall performance.
Who Should Consider and Avoid Monthly Dividend-Paying Funds?
Investors who should consider monthly dividend-paying mutual funds are mentioned below.
- Retirees: Investors who prefer to receive periodic, stable income to facilitate their living expenses after retirement can choose to invest in monthly dividend-yield mutual funds.
- Conservative Investors: Investors who have a low risk appetite and want to invest in large-cap funds for periodic dividends can also choose these funds.
- Investors seeking Diversification: Investors who prefer to maintain a diversified portfolio across multiple funds that have a history of providing regular dividends can invest in dividend-paying funds.
Investors who should avoid monthly dividend -paying mutual funds are mentioned below.
- High-Tax Bracket Earners: Income received as dividends is directly added to the taxable income, making it taxed at regular tax rates. This makes them less efficient for certain investors.
- Long-term Wealth-builders: Investors seeking long-term wealth building may prefer to keep the returns invested rather than distributed periodically.
- Investors Only Seeking Dividends: These funds do not guarantee regular dividends. Therefore, investors who prefer to receive regular income may choose to avoid dividend-yield funds.
How to Choose a Monthly Dividend-Paying Mutual Fund?
Before investing in a monthly dividend-paying mutual fund, investors must evaluate the necessary information related to the fund.
- Investment Objective and Risk Profile: Investors must evaluate the fund’s objective and the risk associated with it to check whether it aligns with their personal financial goals and risk tolerance.
- Portfolio Diversification and Expense Ratio: Investors must go through the selection of companies and sectors where the investments will be allocated and the expense ratio that is charged for maintaining and balancing their portfolio.
- Fund Manager’s Performance: Investors must check the past performance of the fund manager, since they are responsible for asset selection and allocation and also managing the entire portfolio.
- Understand Dividend Policy: Before investing, investors must learn about the firm’s dividend policy and understand that dividends are not fixed. It will be distributed only if there is any distributable surplus left.
SIP vs Lump Sum for Monthly Dividend-Paying Funds
The difference between SIP and lump sum investment of monthly dividend-paying mutual funds is given below.
| Basis | SIP | Lump Sum |
| Investment strategy | Invest a small amount periodically | Invest a large amount at one time |
| Best Suited | Salaried employees who earn regular income | Investors with surplus amount available for investment |
| Risk | Lower risk because of periodic investment | Higher risk because of volatile market conditions |
| Wealth Creation | Suitable for wealth creation over a long time | Can generate higher returns if invested in favourable conditions |
Direct vs Regular Monthly Dividend-Paying Funds
The following table mentions the difference between a direct dividend-paying fund and a regular dividend-paying fund.
| Basis | Direct Dividend-Paying Fund | Regular Dividend-Paying Fund |
| How to invest | Invest directly through fund houses or investment platforms | Invest through banks, brokerage platforms, or financial advisors |
| Expense ratio | Usually lower | Higher because of expert guidance |
| Returns | Higher because of no intermediaries | Relatively lower because of commissions to be paid to the intermediaries |
| Monitoring | Investors are responsible for reviewing their portfolio | Fund managers are responsible for reviewing and adjusting the portfolio |
Taxation of Monthly Dividend-Paying Mutual Funds
The taxation on monthly dividend-paying mutual funds is measured based on the Income Tax Act, on or after 1st April 2023. Since they invest primarily in equity shares, taxation will be applicable based on the treatment of equity mutual funds.
- IDCW income: Income earned as dividends is directly added to the taxable income of investors and is taxed according to their income tax slab.
- TDS: TDS is applied on the income earned as dividends according to the Income Tax provisions.
- Short-term Capital Gain: A 20% tax is applied on capital gains earned if the stocks are sold or redeemed within 12 months of holding them.
- Long-Term Capital Gain: A 12.5% tax rate is applied on gains earned if the shares are sold after exceeding 12 months of holding them.
FAQs
Based on AUM as of 4th August 2026, the top five are SBI Dividend Yield Fund, ICICI Prudential Dividend Yield Equity Fund, HDFC Dividend Yield Fund, UTI Dividend Yield Fund, and Franklin India Dividend Yield Fund.
These funds may be suitable for long-term investors seeking exposure to dividend-paying companies. However, returns and dividend payouts depend on market conditions and are not guaranteed.
Based on the comparison data, Tata Dividend Yield Fund delivered the highest 1-year return (14.80%), while LIC MF Dividend Yield Fund recorded the highest 3-year CAGR (20.73%). Investors should choose a fund based on their investment goals and risk appetite.
Consider the fund’s investment objective, historical performance, expense ratio, portfolio diversification, fund manager’s track record, and dividend policy before investing.
These funds may suit retirees, conservative equity investors, and investors looking to diversify with dividend-focused companies over the long term.
According to the comparison data, Tata Dividend Yield Fund delivered the highest 1-year absolute return among the listed funds.
No. These are equity mutual funds and are subject to market risk. Dividend payouts are also not guaranteed.
If your investment horizon is five years or more and your risk profile matches equity investing, these funds can be considered. Avoid investing solely for regular dividend income.
Dividend-paying mutual funds offer higher return potential but carry market risk and do not guarantee payouts. Fixed Deposits generally provide more predictable returns with lower risk.
