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Dividend yield funds focus on companies that generate good cash flow and give back money to shareholders in the form of dividends and buy backs in a sustainable manner.
To evaluate, investors need to consider the dividend paid out last year, the sustainability of dividends / buy backs and cash flow generation.
While dividend yield funds look for companies with sustainable cash flows, multi-cap fund are chasing companies where fundamentals are not as great today but will have a stronger position in future.
Dividend yield funds have less volatility, reasonable stable returns and will outperform during choppy markets where cost of capital is rising.
Stocks that are typical found in dividend yield funds are from IT and consumer industries. These funds make sense from longer-term perspective.
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