Best NRI Mutual Funds to Get Assured Dividends

Investing wisely is crucial, especially for Non-Resident Indians (NRIs) seeking stable returns and financial security. Mutual funds provide an excellent avenue for NRIs to grow their wealth while minimizing risks. In this blog, we’ll explore some of the best NRI dividend mutual funds, AUM, 1-yr and 3-yr return, expense ratio, benefits, and factors to consider while investing in dividend mutual funds.

Also read: Best SIP to Invest in 2023 – Top 10 SIP Mutual Fund Plans for NRIs

What are Dividend Mutual Funds? 

Dividend mutual funds or dividend yield funds used synonymously is Dividend mutual funds are a specific category of mutual funds that primarily focus on investing in stocks or securities of companies with a consistent track record of paying dividends. In this context, dividends refer to the distribution of a portion of a company’s earnings to its shareholders. Unlike growth-oriented mutual funds that primarily aim for capital appreciation, dividend mutual funds prioritize generating a regular income stream for investors through these dividend payments. Fund managers of dividend mutual funds strategically select stocks of companies known for their stable and often increasing dividend payouts. 

Investors in these funds benefit not only from potential capital gains as the fund’s underlying stocks appreciate but also from periodic dividend distributions. Dividend mutual funds are particularly attractive to income-oriented investors, such as retirees, seeking a reliable and predictable source of income while participating in the potential profitability of established dividend-paying companies. As with other mutual fund schemes, investors can participate in these funds through lump-sum investments or opt for Systematic Investment Plans (SIP). 

Also read: 10 Mutual Funds That Doubled Wealth In 5 Years

Top 5 NRI Dividend Yield Mutual Funds 2023

Here is the list of the top 5 mutual funds focussing on dividend yield 2023 for NRIs based on the returns over the period:

Also read: 10 Highest Dividend Paying Stocks in India 2023

How do Dividend Mutual Funds Work? 

Dividend mutual funds function by pooling money from investors to create a diversified portfolio of stocks known for regular dividend payouts. The fund manager selects companies with a history of consistent dividends, and as these companies earn profits, a portion is distributed to fund investors. This provides investors with a dual benefit—potential capital appreciation and a steady income stream. As per the guidelines of the Securities and Board Exchange of India (SEBI), dividend mutual funds must invest at least 65% of the fund corpus in equity and equity-related instruments. 

Also read: How to Make 1 Crore in 10 Years by SIP?

Benefits of Investing in Dividend Yield Mutual Funds for NRIs

• Steady Income Stream: Dividend mutual funds provide investors with a reliable and regular income stream through periodic dividend payouts from the underlying stocks, making them an attractive option for those seeking consistent cash flow.
• Capital Appreciation: Beyond dividends, investors can benefit from potential capital appreciation as the fund’s underlying stocks increase in value, offering a dual advantage of income and growth.
• Diversification: By investing in a portfolio of dividend-paying stocks, these funds offer built-in diversification, helping to spread risk across different sectors and companies, and enhancing overall portfolio resilience.
• Lower Volatility: Dividend-paying stocks often exhibit lower volatility compared to non-dividend-paying stocks. This characteristic can provide a measure of stability to the fund’s performance, particularly appealing to conservative or income-focused investors.

Also read: Top 5 NRI Mutual Funds for Retirement Planning 2023

Who Should Invest in Dividend Yield Mutual Funds? 

Dividend mutual funds are well-suited for investors with specific financial goals and preferences. Here are groups of individuals who may find dividend mutual funds particularly appealing:

• Income-Seeking Investors: Individuals looking for a steady income stream, such as retirees or those in need of regular cash flow, can benefit from dividend mutual funds that provide consistent dividend payouts.
• Conservative Investors: Investors prioritizing stability and lower risk in their portfolio may find dividend mutual funds attractive. The regular income and historically lower volatility of dividend-paying stocks align with the risk tolerance of conservative investors.
• Long-Term Investors: For individuals with a long-term investment horizon, dividend mutual funds offer the advantage of compounding returns. Reinvesting dividends can contribute to the growth of the investment over time.
• Diversification Seekers: Investors looking to diversify their portfolios can benefit from the inherent diversification of dividend mutual funds. These funds typically invest in a variety of sectors and companies, spreading risk across different asset classes.
• Retirement Planners: Those planning for retirement can use dividend mutual funds to build a reliable income stream for their post-working years, creating a source of financial security during retirement.

Also read: Top 10 Highest Return Mutual Funds for NRIs in the Last 5 Years

Factors to Consider Before Investing in NRI Dividend Yield Mutual Funds

• Investment Goals: Clearly define your investment objectives, whether it’s seeking regular income, capital growth, or a combination of both.
• Risk Tolerance: Assess your comfort with market fluctuations and understand the level of risk associated with dividend mutual funds.
• Dividend History: Evaluate the fund’s historical dividend payments and the consistency of dividends from the underlying stocks in its portfolio.
• Expense Ratios: Consider the fund’s expense ratio, aiming for lower fees to enhance overall returns.
• Diversification: Evaluate the fund’s diversification across sectors and industries to spread risk and enhance portfolio stability.

Also read: Top 5 Tips for NRIs to Pick a Winning Mutual Fund

Can NRI Invest in Dividend Mutual Funds in India? 

Yes, NRIs can invest in dividend mutual funds in India. NRIs can easily invest in different mutual fund schemes and generate higher returns and wealth building. The FEMA Act, RBI rules, and SEBI guidelines govern the rules and regulations regarding NRI investments in mutual funds which is why it has a slightly different procedure than that of resident individuals. However, it is very easy to set up your Mutual Fund KYC and link it to your NRO/NRE bank account to invest in mutual fund schemes in India. 

There are various mutual fund schemes available for NRIs to invest in. Keeping in check with the FEMA Act, the funds on offer for NRIs from the US & Canada to NRIs from other countries may vary at times.

Also read: NRI Mutual Fund KYC in India: The Ultimate Guide 2023

Wrapping Up

Investing in mutual funds is an excellent way for NRIs to secure assured dividends while participating in the growth potential of the market. The mentioned funds are just a starting point; it’s essential for NRIs to conduct thorough research, consider their financial goals, and consult with our wealth experts to make informed investment decisions.

Invest in NRI Mutual Funds with SBNRI 

NRIs can now download the SBNRI App and choose to invest in different NRI mutual fund schemes in India with ease. You can also get detailed mutual fund advice from experts at SBNRI. Also, visit our blog and YouTube channel for more details.

SBNRI is an authorized Mutual Fund Distributor platform & registered with the Association of Mutual Funds in India (AMFI). ARN No. 246671. NRIs willing to invest in mutual funds in India can download the SBNRI App to choose from 2,000+ mutual fund schemes or can connect with the SBNRI wealth team to better understand Mutual Fund investments.

FAQs

How often are dividends distributed in dividend mutual funds?

• The frequency of dividend distribution varies among funds. Some distribute dividends quarterly, while others may do so annually or semi-annually. Investors should check the fund’s policy.

Do dividend mutual funds guarantee returns?

• No, dividend mutual funds, like all investments, carry inherent market risks. While they aim to provide regular income, returns are influenced by market conditions and the performance of underlying assets.

Can I reinvest dividends automatically in mutual funds?

• Yes, many mutual funds offer the option to reinvest dividends automatically, allowing investors to benefit from the power of compounding.

What criteria should I consider when selecting mutual funds for assured dividends?

• Look for funds with a consistent track record of dividend payments, a diversified portfolio, and a history of stable performance in various market conditions.

How does the fund manager’s strategy impact dividend payouts?

• The fund manager’s approach to selecting dividend-paying stocks influences the fund’s ability to generate consistent income. Research the manager’s strategy and past performance.

Can dividend mutual funds provide both income and capital appreciation?

• Yes, dividend mutual funds aim to offer a combination of regular income through dividends and potential capital appreciation as the value of underlying stocks increases.

How can NRI invest in Indian Mutual Funds?

• An NRI can invest in Indian Mutual Funds using his/her NRE/NRO Account. The NRE Account is used to invest on a repatriable basis and NRO Account is used to invest on a non-repatriable basis.

Can I invest from the USA in India?

• Yes an NRI can invest from the USA in India in various asset classes such as FDs, Mutual Funds, Stocks etc.

Can NRI invest in SIP in India?

• Yes, an NRI can invest in India through the SIP route. SIP stands for Systematic Investment Plan.