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Impressive Performer

UTI Dividend Yield has navigated through good and bad times to emerge with impressive numbers…

The mandate demands an investment of at least 65 per cent of the portfolio in equity shares that have a high dividend yield at the time of investment. Kulkarni claims to have always been steadfast. “Almost always 70 per cent of the portfolio will be in stocks qualifying as high dividend yield,” she says. “Even at the peak of the bull run in January 2008 we were within these limits and never deviated from our mandate.”

Its impressive performance in 2007 led to a return of 71 per cent, ahead of the Sensex (47%) and category average (61%). Kulkarni hopped on to the Energy and Metals bandwagon. That year, the BSE Power, BSE Oil & Gas, and BSE Metals indices delivered handsomely.

The objective is best suited to those who want decent returns with good downside protection. Its fall in 2008 was less than that of the Sensex as well as the averages of the multi-cap and dividend yield categories. Of course, allocation to debt and cash also helped cushion the fall. This year (August 30, 2011), the fund lost 11.09 per cent (category average: -15.71%). However, its fall is slightly higher than the average fall of the dividend yield funds.

In 2009, the results of the elections and the rally caught Kulkarni on the wrong foot. She began to seriously up the equity allocation only from June 2009 onwards. “In hindsight, I can say that we were slow in deploying cash and our cash holding was a drag on portfolio performance for a while,” she says. She also increased large-cap exposure despite mid-cap stocks performing better in 2009. In 2010, the fund was able to stay ahead of its category peers but lagged behind its dividend yield peers who were betting high on mid-cap stocks. Currently, the fund has the highest large-cap exposure among dividend yield funds. “The fund has about 30 per cent exposure to mid and small caps,” says Kulkarni. “Depending on the investment opportunities from time to time, the allocation may vary 5 per cent on either side.” The increased exposure to large caps has led the fund to move out from the ‘Multi Cap’ category into the ‘Large & Mid Cap’ category this year.

The intrinsic nature of this portfolio is to pick up good dividend yield stocks which bring support on the downside. Kulkarni look for companies which have sustainable cash flows and also at capital appreciation potential. “Analysis of future earnings prospects, competitive strengths, regulatory controls and management quality” are the other parameters applied.