LIC MF Dividend Yield Fund – LIC Mutual Fund
LIC MF Dividend Yield Fund
Problem
- Need for equity products offering both growth and income.
- Investor demand for lower volatility in equity investments.
- Lack of focus on dividend-yielding strategies in Indian mutual funds.
- Avoiding value traps in high-yield stocks.
- Enhancing long-term wealth creation with consistent cash flows.
Solution
- Designed a market-cap agnostic equity strategy focused on sustainable dividend payouts and reinvestment potential.
- Developed a rigorous screening framework selecting businesses with positive cash flows and consistent dividends.
- Integrated growth + yield filters to avoid dividend traps and support capital appreciation.
- Implemented active portfolio monitoring for diversification and quality alignment.
- Prioritized companies with strong fundamentals and proven dividend-paying capacity.
Outcomes
- Strong investor adoption, positioning the fund as a preferred option for growth + income seekers.
- Enhanced investor awareness of dividend yield strategies as a hedge against volatility and inflation.
- Improved portfolio quality by avoiding value traps.
- Increased alignment with benchmark indices and rising investor traction.
- Expanded assets under management through improved performance.
SKOCH Award Nominee
Category: Financial Services
Sub-Category: Mutual Fund – Equity Oriented Fund
Project: LIC MF Dividend Yield Fund
Start Date: 2-21-2018
Organisation: LIC Mutual Fund
Respondent: Saurabh Vashistha
https://www.licmf.com/investor/licmf-dividend-yield-fund
Level: BFSI – 1
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Case Study
LIC MF Dividend Yield Fund – LIC Mutual Fund
The LIC MF Dividend Yield Fund was conceptualised to address a clear and widening gap within India’s evolving investment landscape. Investors often faced the dilemma of choosing between high-growth equity opportunities and income-generating products, with very few solutions offering both. The fund was launched to resolve this by identifying companies capable of delivering sustained dividend payouts while also demonstrating the financial strength necessary for long-term capital appreciation. From its operational start in December 2018, the fund sought to combine stability and growth through a disciplined strategy, emphasising strong fundamentals, predictable cash flows, and prudent corporate governance practices.
The design of the portfolio was rooted in avoiding value traps. Many companies exhibit high dividend yields but lack the reinvestment capacity, operational strength, or financial health to sustain these payouts. The fund managers implemented a rigorous screening process that prioritised businesses generating positive operating cash flows, consistently delivering dividends, and earning returns above their cost of capital. This process ensured that dividend yield was not treated as a superficial metric but as an indicator of deeper business stability and quality. The fund further incorporated growth-oriented filters to ensure that companies offering dividends also possessed the ability to expand and create long-term shareholder value.
The project faced several challenges throughout its implementation. One significant obstacle was investor perception. Many investors viewed dividend yield funds as fixed-income substitutes, not understanding that these remain stock market–linked equity investments with inherent volatility. Continuous investor education was necessary to clarify the fund’s positioning, objectives, and long-term advantages. Market cycles also presented challenges, particularly during phases when growth-oriented stocks outperformed value-oriented companies. Despite temporary dips in relative performance, the fund remained committed to its philosophy of sustainable dividends backed by strong fundamentals.
The long-term impact of the project has been notable. The fund has gained strong traction among investors seeking a combination of stability and upside potential. Over the evaluation period, it achieved increased adoption and strengthened investor confidence. Additionally, the overall quality of the portfolio improved as the disciplined strategy ensured consistent avoidance of value traps. The fund’s alignment with benchmark indices strengthened, contributing to improved performance and rising assets under management.
For more information, please contact:
Saurabh Vashistha at s.vashistha@licmf.com
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