It is dividend time again. The mad dividend rush towards the end of the year has been accentuated this year by the tax announcements in this year's Budget making dividends from mutual funds taxable in the hands of the investors.
Pru-ICICI Mutual Fund, the largest fund in the private sector, for instance, has paid out around Rs 125 crore as dividend in March alone so far. Around Rs 100 crore was due to the debt schemes while the outgo in equity schemes was around Rs 25 crore.
Industry sources said, according to conservative estimates, around Rs 1,500 crore would have been paid out by mutual funds during the current month alone. According to an industry watcher: "The figures are just an estimate based on an average outgo of Rs 50 crore per fund."
Income funds have been declaring dividends left, right and centre. So have cash, liquid, gilt, bonds and even equity schemes. The idea is to reward investors for their loyalty and ensure their stickiness in the coming fiscal as well, when income funds or any dividend-paying fund will no longer be so attractive due to the tax factor.
Funds generally declare dividends only when they have cash surplus preferring to reinvest, rather than distribute income. The fact that none of the funds are assuring any returns absolves them of any monetary liability towards the investors. But this month has seen almost all fund houses declaring dividends on their various schemes.
Some of the fund houses have been going overboard in their dividend declarations. Pioneer ITI for instance has declared dividends ranging between 14 per cent to 57 per cent in some schemes. Pioneer's Short Term Income Plan has declared a dividend of 57 per cent.
Reliance Income Fund has declared a dividend of nearly 14 per cent, K-Gilt 11 per cent, while Alliance Cash Manager declared a 12.4 per cent dividend.
Fund houses themselves however tended to downplay the phenomenon saying that the fag end of the year always saw higher dividend outgo than the rest of the year, since tax planning and other compulsions forced funds to declare dividends to accommodate their corporate clients.
Unlike their corporate counterparts, - who were forced to revoke their dividend declarations made immediately after the Budget announcements - mutual funds have no restrictions on payment of dividends and they have been taking full advantage of it.
