Baroda BNP Paribas Mutual Fund has announced the launch of Baroda BNP Paribas Dividend Yield Fund, an open-ended equity scheme predominantly investing in dividend yielding stocks. Equity investments create wealth by both capital appreciation as well as by income from dividend. As such this strategy aims at investing in companies that give dividends and keep growing.
The New Fund Offer (NFO) will remain open from 22nd August to 5th September 2024.
Scheme Overview:
The Baroda BNP Paribas Dividend Yield Fund aims to invest in companies with predictable and stable cash flows, led by managements that prioritize rewarding shareholders with regular dividends. The investment approach is to invest in growth companies that are also rewarding investors through regular dividends and buybacks.
The fund will invest in companies with high free cash flows and a history of paying regular dividends. The fund follows a five-stage selection process to build a market cap agnostic portfolio of reasonably priced companies while avoiding companies that maybe dividend traps.
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Key Features and Benefits:
Higher Free Cash Flow: Dividend-paying companies tend to have a higher free cash flow, which in turn tends to have a positive impact on their share price.
Promoter Alignment: Promoters rewarding shareholders with dividends demonstrates alignment with minority shareholders.
Performance Insights: In 10 out of 16 years since FY 2009, the Nifty Dividend Opportunities 50 TRI has outperformed the Nifty 500 TRI index. Rs 1 lakh invested in October 2007 in the Nifty 500 TRI would have grown to Rs 6.7 lakh, whereas the same sum invested in the Nifty Dividend Opportunities 50 TRI would have grown to Rs 10.4 lakh as of July 31, 2024. (Source: NSE and Internal research. Past performance may or may not be sustained in future.)
Diversification: The fund benefits from diversification across various sectors and market capitalizations, mitigating risks and enhancing potential returns.
The Baroda BNP Paribas Dividend Yield Fund will be managed by Shiv Chanani, Senior Fund Manager Equity at Baroda BNP Paribas AMC with over 24 years of experience.
“Dividend-paying companies tend to have a higher average return on equity than non-dividend-paying ones, as per a study of Nifty 500 constituents since FY 2020 onwards. In FY 2024, these dividend-paying companies had an average ROE of 20.5% versus 13.4% *for non-dividend-paying companies. The Fund will aim to invest in a portfolio of high-quality businesses with shareholder-friendly management practices” said Suresh Soni, CEO of Baroda BNP Paribas AMC.