ICICI Prudential Dividend Yield Fund has outperformed its broad market benchmark and peers across time horizons ranging from 1 yr to 10 yrs.
Mittul attributes this to a key change in philosophy made a few years ago which redefined stock selection focus from high dividend yields to sustainable yield.
Many high dividend yielding stocks have rather poor capital appreciation track records, which in a growth market like India, makes total returns of such a strategy potentially underperform the market.
Focusing on sustainable yield however ensures selection of companies with reasonable growth coupled with healthy payout ratios, thus enabling an optimal blend between yield and appreciation.
The quest for sustainable yield stocks takes Mittul into growth, quality as well as value stocks and also into all cap sizes. The fund is thus style and cap agnostic.
Investors who buy residential real estate for renting out seek modest annual yield and reasonable capital appreciation over a real estate cycle. A sustainable yield approach endeavours to do something similar though not quite the same in the stock market. Mittul however cautions that there are phases in the market where yield is very hard to come by.
Mittul says the fund’s well diversified portfolio and style agnostic approach lends this fund to a core long term holding positioning and not just a tactical “hiding place” when markets turn rough – which is the positioning many experts have been giving to the Dividend Yield category of funds.
Its consistent performance bolsters the positioning Mittul suggests as a fund for every investor’s core portfolio.