Best Dividend Yield Mutual Funds in India 2026: Guide & Top Fund
What Dividend Yield mutual funds are, who should invest, key risks, and the top-ranked fund with returns and risk data.
Dividend yield mutual funds invest mostly in companies with the potential to pay regular dividends, with the aim of generating income. They tend to be less volatile than many other equity funds. This guide covers who should invest, benefits, risks, and the top-ranked dividend yield fund from our data.
Key takeaways
- Dividend yield funds focus on high-dividend-yielding stocks to generate income for investors.
- SEBI requires them to invest at least 65% of assets in equity and equity-related instruments.
- They are relatively less affected by market volatility than other equity-oriented funds, but are not risk-free.
- They suit investors seeking passive income and a lower-risk equity option.
- Only one dividend yield fund matches in our data; it is ranked below by an internal score, with return and risk numbers shown.
What are dividend yield mutual funds?
A dividend yield fund invests mostly in companies that can pay regular dividends. A dividend is a part of a company's profit distributed to its investors, and dividend yield is the annual dividend per share divided by the current share price, as a percentage. The fund aims to generate income by holding high-dividend-yielding stocks.
Who should invest in dividend yield funds?
- Passive income seekers: these funds offer regular dividend payouts.
- Low-risk investors: their risk is lower than that of many other equity funds.
What should you consider before investing?
- Risk tolerance: conservative investors who value stability can look for funds with a higher allocation to large cap equities.
- Investment tenure: a fund that has seen both bull and bear markets can give a better picture than a newly launched one, so review performance across market cycles.
Advantages of dividend yield mutual funds
- Equity exposure with lower risk: they are relatively less affected by market volatility, which suits investors seeking more than fixed deposits can offer.
- Long-term return potential: they invest in companies with strong financials and proven track records.
- Regular income: underlying companies declare regular dividends.
- Flexible investing: invest via a lump sum or a SIP.
Risks of dividend yield mutual funds
- Inherent fund risks: liquidity, credit, market and concentration risks apply here too.
- Tax impact: a change in how dividend income is taxed can increase the tax on dividends.
- Returns vary: they are less volatile, but subject to market risk and cannot be guaranteed.
How are Dividend Yield mutual funds taxed?
Gains from Dividend Yield funds are subject to capital gains tax as equity mutual funds; dividend income is also taxable. The rates and holding-period rules depend on the fund type and can change, so check the current rules or speak to a tax advisor before you invest.
Top-ranked Dividend Yield mutual fund
This is the top-ranked Dividend Yield fund from our data, ranked by Invo Wealth's internal fund-quality score. The score itself is not shown, only the return and risk numbers behind it. A "--" means the fund has not completed that period or the data is unavailable.
Returns across 6 months to 5 years
Performance data as of 5 September 2026.
| Fund | 6M CAGR | 1Y CAGR | 3Y CAGR | 5Y CAGR |
|---|---|---|---|---|
| UTI - Dividend Yield Fund | -1.78% | -0.04% | 12.72% | 10.43% |
Risk and consistency metrics
| Fund | ISIN | Volatility | Max drawdown (3Y) | Sortino ratio |
|---|---|---|---|---|
| UTI - Dividend Yield Fund | INF789F01463 | 15.20% | -18.37% | 0.52 |
Compare each fund's volatility and drawdown with its returns to see how steady the ride has been.
How to invest in Dividend Yield mutual funds
You can invest in these funds using the Invo Wealth app. Sign up, get complete portfolio insights and start investing in mutual funds that actually suit you.
Conclusion
Dividend yield funds can suit investors who want income and relatively steadier equity exposure. Returns still depend on markets, so check the risk numbers before you invest.
Frequently asked questions
What is a dividend yield fund?
A dividend yield fund is an equity fund that invests mostly in companies with the potential to pay regular dividends. SEBI requires it to invest at least 65% of its assets in equity and equity-related instruments.
What is dividend yield?
Dividend yield is the annual dividend per share divided by the current share price, expressed as a percentage.
Are dividend yield funds a good investment?
They can suit investors who want to lower risk and volatility. Aggressive growth seekers may add them to a portfolio, but returns remain subject to market risk and are not guaranteed.
Is there an exit load on dividend yield funds?
An exit load is normally charged when you sell units. Its percentage depends on the scheme's terms.
How can I invest in dividend yield mutual funds?
You can invest through a SIP or a lump sum. To invest in these funds, you can use the Invo Wealth app: sign up, get portfolio insights and start investing.
Mutual fund investments are subject to market risks; read all scheme-related documents carefully. This article is for education only and is not investment advice. Past performance does not guarantee future returns. Invo Wealth is an AMFI-registered mutual fund distributor (ARN-368528).