HDFC

Dividend Yield Fund

(An open ended equity scheme
predominantly investing in
dividend yielding stocks)

This product is suitable for investors who are seeking*: Riskometer

• Capital appreciation over long term/regular income

• Investment predominantly in equity and equity related Instruments of dividend
yielding companies
*
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Investors understand that their principal
is suitable for them will be at moderately high risk

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Index
Index

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Dividend Yield
and its Importance
Dividend Yield

What is Dividend yield?

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LWVVWRFNSULFH

Why look at Dividend paying companies? Dividend Yield (DY) peak – A sign of market bottom

'LYLGHQG<LHOGDJRRGYDOXDWLRQLQGLFDWRU 14000 3.25

12000
+LJK'LYLGHQG<LHOGLQJ6WRFNVUHSUHVHQWJRRG 2.75
10000
cash flow in business and management commitment
8000 2.25
WRZDUGV6KDUHKROGHUV
6000 1.75
Financial health of the company and higher 4000
5HWXUQRQ(TXLW\52( 2000
1.25

'LYLGHQGSD\PHQWUHTXLUHVFDVKZKLFKFDQQRWEH 0 0.75

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
manipulated
NIFTY 50 NIFTY 50 DY
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Why Dividend
Yielding Stocks?
Characteristics of Typical Dividend Paying Companies

0DWXUHDQGOHVV Healthy Cash Flow

volatile businesses generating companies

Dividend
Yielding Stocks
Capital intensive 0DQDJHPHQW&RPPLWPHQW
EXVLQHVVHVOLNHXWLOLWLHV WRZDUGV6KDUHKROGHUV
PLQLQJHWFDQGDQQXLW\ and supports higher
cash flow type businesses 5HWXUQRQ(TXLW\52(
([DPSOH$WRZHUFRPSDQ\

A clever accountant can make earnings appear good or not so good, depending on the season or the objective.
There can be no subterfuge about a cash dividend. It is either paid or it is not paid.
-Geraldine Weiss

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5
Dividend - An Important Source of Return
Indices 1 Year 3 Years 5 Years 7 Years 10 Years
1,)7<35,     
1,)7<75,     
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Difference 1.0 4.4 9.4 16.7 25.2
IRU6KDUHKROGHUV

1,)7<35,      7KHGLIIHUHQFHEHWZHHQ3ULFH5HWXUQV,QGH[DQG

1,)7<75,      7RWDO5HWXUQV,QGH[ZKLFKLQFOXGHVGLYLGHQGV
Difference 1.0 4.2 9.6 17.9 26.8 LVDSSUR[LPDWHO\IRUPDMRULQGLFHVLQODVW
\HDUV
1,)7<35,     
1,)7<75,      )RU1,)7<'LYLGHQG2SSRUWXQLWLHV,QGH[
Difference 1.0 4.0 9.1 17.8 26.1 WKHGLIIHUHQFHLVDVKLJKDV

1,)7<35,     

1,)7<75,      5HYHQXHLVYDQLW\3URͤWLVVDQLW\DQG
Difference 1.0 3.8 8.8 16.8 23.5 cash flow is reality. Dividend is cash flow
for a Shareholder.
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1,)7<'LYLGHQG2SSRUWXQLWLHV75,     
Difference 2.5 8.6 19.2 32.2 45.4

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NIFTY 50 vs NIFTY Dividend Opportunities 50
Index rebased to 1000
NIFTY Dividend Opportunities 50 TRI NIFTY 50 TRI
4000

3500 3361/9.70% CAGR

3000
2683/7.83% CAGR
2500

2000

1500

1000
Difference:
500 1.87% CAGR

0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

As on 30th Oct’2020, market value of investment in NIFTY Dividend Opportunities 50 Index was ~25% higher
than a comparable investment made in NIFTY 50 Index (assuming investment made on 1st Oct’07)
CAGR : Compounded Annual Growth Rate
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Why now?
Low Interest Rates Favorable for Dividend Yielding Stocks
4000 10
Graph 1 12 Graph 2
3500
9
10
3000

8 8
2500

2000 7 6

1500
6 4
1000
2
5
500
0
0 4
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

NIFTY Dividend Opportunities 50 TRI 10 Year Gsec Dividend Yield 1 year Gsec

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Dividend received in the hands of investors directly from companies are taxed at their marginal income tax rate while the
dividend received by MF scheme is tax free .
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Attractive Valuations
5
40 Price to Earnings Price to Book
35 4
30
25 3

20
2
15
10
1
5
0 0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

NIFTY Dividend Opportunities 50 Index NIFTY 50 NIFTY 50 NIFTY Dividend Opportunities 50 Index

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decent investment opportunity
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Buy Back Opportunities

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Tend to improve company valuations
Returns cash to the shareholders
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Recently many IT companies have opted for buy backs in

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Opportunity in Utilities, Mining and Financial Sectors
NIFTY 50 DY vs NIFTY PSE DY Polarized performance over the last 2 years
9000 S&P BSE PSU S&P BSE Sensex
8
7 Rebased to 1000
8000
6
7000
5
4 6000
3
5000
2
1 4000

0
3000
17

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NIFTY PSE Div Yield NIFTY 50 Div Yield
0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020
40
NIFTY 50 PE vs NIFTY PSE PE )RU\HDUVEHWZHHQDQG%6(368,QGH[\LHOGHGWKHVDPHUHWXUQ
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'DWD6RXUFH0),DQGZZZQVHLQGLDFRP The above statements / analysis should not be construed as an investment advice or a research report or a
5HIHU'LVFODLPHURQSDJH recommendation to buy or sell any security covered under the respective sector/s
13
Tax Arbitrage via Mutual Fund Route
Dividend received at MF scheme level is tax
Dividend Income from direct equity taxed in
free. Mutual Fund Income is taxed in the
the hands of Shareholders at
hands of Resident Individual/HUF at

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RUSOXVFHVV  &HVV 17.94% or 17.16%
34.32% or 35.88%
LTCG ## ZLWKRXWLQGH[DWLRQ6XUFKDUJHDV
DSSOLFDEOH&HVV 11.96% or 11.44%

Investors with a requirement of regular income could opt for SWAP under growth option of dividend yield fund;
thus paying a lower tax on regular income compared to direct investment in stocks.
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*

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14
Presenting
HDFC
Dividend Yield
Fund
Investment Strategy

The Fund aims to:

 ,QYHVWPLQLPXPRILWVDVVHWVLQGLYLGHQG\LHOGLQJFRPSDQLHV* at
the time of investment or companies that chooses to do a buyback in
addition of payment of dividend or in lieu of dividend

Preference will be given to build portfolio with stocks having:

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the time of investment
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16
High Cash Flow Generating Companies
A FMCG Company
2 80000
1.8 70000
1.6
60000
1.4
1.2 50000

1 40000 'LYLGHQGSD\RXWVUHTXLUHFDVKIORZVZKLFKFDQQRW
0.8
0.6
30000

20000
be manipulated
0.4
0.2 10000

0 0 Companies that pay consistent dividend usually have

2016 2017 2018 2019 2020

Dividend Yield % Free Cash Flow (Rs mn) (RHS)

consistent and higher cash flows from their operations

An IT Company &RQVLGHULQJ'LYLGHQGSD\RXWDVRQHRIWKH
3.00 350000 factors in investing is a more reliable strategy
2.50 300000

250000
2.00
200000 The above should not be construed as an investment advice or a research report or
1.50
150000 DUHFRPPHQGDWLRQE\+')&0XWXDO)XQG+')&$0&WREX\RUVHOOWKHVWRFNRUDQ\
1.00
100000
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0.50 50000

0.00 0
2016 2017 2018 2019 2020

Dividend Yield % Free Cash Flow (Rs mn) (RHS)

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17
5
Dividend Yield - A Good Valuation Indicator
Example 1: A Specialty Chemical Company Example 2: A Two Wheeler Company
800000 6.00
800000 7.00

5.00 700000 6.00

700000
600000
4.00 5.00
600000 500000
4.00
3.00 400000
500000 3.00
300000
2.00
2.00
200000
400000
1.00 100000 1.00

300000 0.00 0 0.00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Dividend Yield (%) Mcap (Rs mn) (LHS)
Dividend Yield (%) Mcap (Rs mn) (LHS)

$VSHFLDOW\GUXJFRPSDQ\ZDVWUDGLQJDW A two wheeler company was trading at

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3RVWZHVDZDJURZWKLQPDUNHWFDS 0DUNHWUHZDUGHGSDWLHQWLQYHVWRUVLQWKHHQVXLQJ
with stock price doubling over a period of period as the market cap of the company almost
4 years GRXEOHGRYHUDSHULRGRI\HDUV

Companies with High Dividend Yield tend to reward shareholders in the long term
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18
Wide Array of Opportunities
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1,)7<,QGH[ZKLOHFRPSDQLHVKDYHSDLGGLYLGHQGLQDWOHDVWRQHRXWRIODVWWKUHHͤVFDO\HDUV
Market Cap Break-up Present across Sectors and Industries

Market Cap No. of Companies &RPPXQLFDWLRQ6HUYLFHV

Large 
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0LG  &RQVXPHU6WDSOHV
Small  Energy Dividend yielding stocks
Total 440 Financials are present across 11 sectors
Dividend Yield Break up Health Care and 56 industries
Dividend Yield* No. of Companies Industrials
Information Technology
! 
WR  0DWHULDOV
<1.5% * Real Estate
Total 440 8WLOLWLHV
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*

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19
About the Benchmark and Constituents
The NIFTY Dividend Opportunities 50 IndexLVGHVLJQHGWRSURYLGHH[SRVXUHWRKLJK\LHOGLQJFRPSDQLHVOLVWHGRQ16(ZKLOHPHHWLQJVWDELOLW\
DQGWUDGDELOLW\UHTXLUHPHQWV7KHPHWKRGRORJ\HPSOR\VD\LHOGGULYHQVHOHFWLRQFULWHULDWKDWDLPVWRPD[LPL]H\LHOGZKLOHSURYLGLQJVWDELOLW\
DQGWUDGDELOLW\&XUUHQWO\WKHLQGH[FRPSULVHVRIFRPSDQLHVOLVWHGDWWKH1DWLRQDO6WRFN([FKDQJH16(
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FRQVWLWXHQWZKHUHDSSOLFDEOHLVFDSSHGDW
Sector representation
Top constituents by weightage Sector Weight(%)

Company’s Name Weight(%) Consumer Goods 

IT 
7DWD&RQVXOWDQF\6HUYLFHV/WG 
2LO *DV 
,QIRV\V/WG 
Power 
+LQGXVWDQ8QLOHYHU/WG  Automobile 
,7&/WG  0HWDOV 
1HVWOH,QGLD/WG  )LQDQFLDO6HUYLFHV 
7HFK0DKLQGUD/WG  ,QGXVWULDO0DQXIDFWXULQJ 
3RZHU*ULG&RUSRUDWLRQRI,QGLDOWG  Telecom 
173&/WG  Pharma 
%DMDM$XWR/WG  0HGLD (QWHUWDLQPHQW 
+HUR0RWR&RUS/WG  Construction 
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UHOLDELOLW\RIWKHDERYHLQIRUPDWLRQWRWKHEHVWRILWVHQGHDYRUV+RZHYHU16(,QGLFHV/LPLWHGPDNHVQRZDUUDQW\RUUHSUHVHQWDWLRQDVWRWKHDFFXUDF\FRPSOHWHQHVVRUUHOLDELOLW\RIDQ\RIWKHLQIRUPDWLRQ
FRQWDLQHGKHUHLQDQGGLVFODLPDQ\DQGDOOOLDELOLW\ZKDWVRHYHUWRDQ\SHUVRQIRUDQ\GDPDJHRUORVVRIDQ\QDWXUHDULVLQJIURPRUDVDUHVXOWRIUHOLDQFHRQDQ\RIWKHLQIRUPDWLRQSURYLGHGKHUHLQ
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Portfolio Construct

Companies with stable Companies with Buyback Companies

business models growing dividends opportunities trading at attractive
dividend yields

Low Capital intensive Companies with Companies with Dividend Yield at

businesses JURZLQJSURͤWV surplus cash 1x to 2x of 10 Year
G-Sec yields

Stable cash-flows Ability to increase

and share price/ dividends
market cap movement

Opportunity
across sectors

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21
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Product Risk

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Suitability

The Fund is suitable for investors:

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DQREMHFWLYHWRSURYLGHFDSLWDODSSUHFLDWLRQRYHUORQJWHUP

Aiming for investment in equities with fair amount of stability and

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:KRDLPWRWDNHDGYDQWDJHRIWD[DUELWUDJHYLDPXWXDOIXQGURXWH
compared to direct investing in dividend yielding stocks

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23
Sources of Risk & Mitigation

Sources of Risk
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PD\OHDGWRLQDELOLW\RIWKHFRPSDQ\WRVHUYLFHGHEWGLYHUVLͤFDWLRQDQGSURPRWHU
UHODWHGLVVXHVOLNHOHYHUDJHHWF

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domestic economic growth

Government policies

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Mitigation
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Product Features
Name HDFC Dividend Yield Fund

Type of Scheme An open ended equity scheme predominantly investing in dividend yielding stocks

NFO Period November 27, 2020 to December 11, 2020

Investment Objective 7RSURYLGHFDSLWDODSSUHFLDWLRQDQGRUGLYLGHQGGLVWULEXWLRQE\SUHGRPLQDQWO\LQYHVWLQJLQDZHOOGLYHUVLͤHG

portfolio of equity and equity related instruments of dividend yielding companies.
There is no assurance that the investment objective of the Scheme will be realized.

Fund Manager(s)$ Gopal Agrawal

Investment Plans Direct Plan

Regular Plan

Investment Option Under Each Plan: Growth & Dividend. The Dividend Option offers Dividend Payout and Reinvestment facility

Minimum Application Amount Purchase: Rs. 5,000 and any amount thereafter
(Under Each Plan /Option) Additional Purchase: Rs. 1,000 and any amount thereafter

Load Structure Exit Load:

In respect of each purchase/switch-in of units, an Exit load of 1% is payable if units are
redeemed/switched-out within 1 year from the date of allotment.
No Exit Load is payable if units are redeemed / switched-out after 1 year from the date

In respect of Systematic Transactions such as SIP, GSIP, Flex SIP, STP, Flex STP, Swing STP, Exit Load,
if any, prevailing on the date of registration / enrolment shall be levied.

Benchmark NIFTY Dividend Opportunities 50 TRI (Total Returns Index) .

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