Dividends by the Bucketful
Oh! boy it's been pouring. Well, we are not talking just monsoons here. Ever since the Budget made dividends from equity funds totally tax-free the pace of dividend payouts has sharply increased. Of course, a booming stock market also had a role to play here. After all, if funds don't generate profits, there won't be any dividend, irrespective of tax concessions.
While financial year 2003 saw eight diversified funds pay dividends, this fiscal year so far has seen 20 payouts. Of these 20 schemes, Birla Dividend Yield Plus and DSP ML Top 100 Equity were launched in this calendar year.
Of the remaining schemes Birla Midcap, Sundaram Select Focus, Sundaram Select Midcap and HSBC Equity were launched in the second half of calendar 2002. In the case of Birla Dividend Yield Plus, UTI Master Value and Reliance Vision this is the second round of dividend distribution in the calendar year so far.
In comparison to equity schemes, tax-saving funds had a poor run in terms of dividend payouts. In the last financial year, only one scheme—HDFC Tax Plan 2000—paid out a dividend. This fiscal HDFC Taxsaver (previously called Zurich India Taxsaver) has been the sole tax saving fund to declare a dividend, thus far.
Dividends are nothing but a way for a fund to distribute profits. Equity investors looking for long-term growth, however, may not find this appealing. After all you want your money to grow over time and not returned to you.
And that's the reason why funds offer separate growth and dividend options. And within the dividend option, you can either go for a dividend payout or re-investment (read Growth Vs Dividend Re-investment on page 45 to know why the re-investment option is a better bet). The tax-free status of dividends also makes them attractive. But this tax concession will remain till March 31, 2004. So, enjoy it till it lasts.