Equity funds are showering investors with tax-free dividends. As many as 7 equity and one balanced fund will pay dividends in the next one month. In fact, the record date for dividend in Zurich India Top 200 and Sun F&C Value Fund is February 23. The two funds provide the short-term investors with a dividend stripping opportunity. While Sun F&C Value has declared a dividend of 30% (Rs 3 per unit), Zurich India AMC will declare the quantum of dividend post record date. Investments in the dividend option of the two funds before 3.30 pm on February 23, will be eligible for the payout.
Both Sun F&C Value and Top 200 have paid three dividends so far, aggregating to 105% and 71%, respectively. Launched in July 1997, the diversified equity fund from Sun F&C Value has generated a return since launch of 27.81% while Top 200, launched in 1996, has delivered 17.02%.
The other funds with dividend declarations include Index Select Equity and Grandmaster from Unit Trust of India, Alliance Equity and Alliance Balanced, Kothari Pioneer Bluechip and IL&FS Growth and Value (semi-annual option). Barring IL&FS Growth (record date of February 24), the rest from this pack have either a lock-in or a book closure to deter short-term investors.
The record date for dividend in balanced fund, Alliance '95 is March 9. With a return of 32.46% since launch in 1995, the fund has paid five dividends so far, totalling 114.3%. For Alliance Equity, with a return since launch of 63.73%, this will be the fourth dividend with the record date on March 20. The prior payouts add up to 105%. Both the funds from Alliance levy a 7-business day lock-in on fresh purchases.
The oldest private sector equity fund, KP Bluechip has paid four dividends to date, adding up to 145% and a 1:1 bonus on the back of a 27.51% return since launch in November 1993. The record date for the dividend is March 9, 2001 and fresh investments till then will come with a lock-in of 10 days.
One wonders why the AMC has adopted a different policy towards short-term investments in Bluechip. In January this year, Kothari Pioneer paid 25%, each in its other two diversified equity schemes, Prima and Prima Plus. However, none of the two funds had a lock-in to deter dividend strippers. Pangs of conscience for the AMC?
UTI's Index Select Equity and Grandmaster have declared a dividend of 15% and 10%, respectively. The book closure for dividend is from March 15 to March 19, 2001. While it's a maiden payout from Index Select Equity, it will be the third dividend from Grandmaster. An actively managed index fund, Index Select Equity has delivered a return of 17.81% since launch in June 1997. On the other hand, Grandmaster '93 went open-end in August 1996 and has paid two dividends so far, aggregating to 22%. Since launch in 1993, the fund has delivered a meagre return of 4.69% and has underperformed its benchmark, BSE Sensex that returned 8.3% during the same period.