Tata Mutual Fund on Monday announced the launch of Tata Dividend Yield Fund, an open-ended equity scheme investing in dividend yielding stocks whose objective is to provide long-term capital appreciation and/or dividend distribution by mainly investing in a diversified portfolio of equity and equity-related instruments of dividend yielding companies. The scheme does not guarantee any returns.

Speaking at the launch, Rahul Singh, CIO-Equities at Tata Asset Management, said, “Nifty FY22 PER at ~20x is in the fair value range, after factoring in robust earnings recovery in the medium term coupled with low interest rates. However, given evolving macro risks to earnings at current valuation, volatility is here to stay in the short term. With such a backdrop of earnings, low interest rates and better prospects for domestic cyclicals, we’re introducing a fund which would give the investor an opportunity to earn regular dividend with capital appreciation.”

Sailesh Jain of Tata Asset Management, who will manage this fund, said, “Our portfolio would largely consist of companies paying dividends higher than the market, thereby providing a healthy mix of both stable growth companies and value segments of the market. Our analysis of past data suggests that high dividend paying companies generally provide greater protection during market volatility, and generate gains that are in line with the broader market when the market stabilises. In addition to stable and growing companies paying dividend, we may identify and include out-of-favor dividend paying companies that can benefit from re-rating driven by industry fundamentals, management execution or better capital allocation. The fund will also seek to invest in REITs & InvITs, based on the risk-reward assessment.”

Though dividend yield would be the main criteria in selecting companies to invest, other factors, like management quality, business growth prospects, financials, products and industry cycles, would also be considered in each and every investment decision.

The scheme shall invest minimum 65% of net assets in equity and equity-related instruments of dividend yielding companies.

The New Fund Offer (NFO) opens on May 3 and closes on May 17. The face value of the unit is Rs 10. NFO application requires a minimum amount of Rs 5,000, and in multiples of Rs 1 thereafter.