Balanced Funds are good for monthly dividends, though we must admit that with a crash in the stock markets, dividend of these funds has reduced. Also, with effect from April 1, 2018, there would be a dividend distribution tax on these funds, which is not good news for investors.
What are balanced funds?
Balanced funds are mutual fund schemes that invest almost 60 to 70 per cent of their money into equities. Because of the high exposure to equity in the past they have declared higher dividends and returns have been better than traditional debt instruments.
ICICI Prudential Balanced Fund
The last monthly dividend declared was Rs 0.24 per unit. The one year returns from the fund has been 9.81 per cent, while the three year returns has been 10.50 per cent. This balanced fund has sizeable assets under management to the tune of more than Rs 27,000 crores. The fund has holdings in ICICI Bank, Infosys and NTPC among others in terms of shares held.
On the other hand, it has fairly large exposure to quality debt including names like 7.17% GOI 2028, HDFC and Axis Bank debt. If stock market conditions continue to remain weak, do not expect superlative returns from balanced funds.
HDFC Prudence Fund
This is one of the top balanced funds in the country with assets under management of a huge Rs 37,000 crores. However, in line with the markets the performance in the last 2-3 months have not been too great.
In the last one year, the fund has generated a return of 8.52 per cent. The 5-year returns from the fund has been exceptional at 16.53 per cent.
The monthly dividend was Rs 0.30 declared in the month of Feb. The fund also has exposure to debt instruments like HDFC Bank Bonds, State Bank of India Bonds and Tata Sons debentures.
Canara Robeco Balanced Fund
Canara Robeco Balanced Fund has given slightly superior returns in the short term in comparison to most funds. The 1-year returns from the fund is 10.69 per cent, while the 5-year returns is 15.98 per cent.
In terms of equity exposure the fund has exposure to stocks like HDFC Bank, Infosys, ICICI Bank, Kotak Mahindra Bank and Bajaj Finserv.
The fund also has debt exposure to government securities and also to IndiaBulls Housing and CDs of NABARD. The last monthly dividend paid was 0.63 per unit. Again, we wish to state that returns from most of these balanced funds would depend on how stock markets perform. A poor performance would have an impact on the dividend distribution as bulk of the money is placed in equities. On could also consider other investments like company FDs.