For eyes eagerly waiting for the monthly incomes from their mutual fund investments, the wait does not seem to end. Baring a handful of MIPs, most have kept a low key profile, as far as dividend payouts are concerned, for the financial year 2008-09. The monthly income plans (MIP) are fairly popular amongst investors, especially pensioners and are believed to be a source of regular income through periodic dividend payouts.
According to the mutual funds portal ICRA online, out of the 34 odd MIPs with a monthly dividend payout option, only five schemes have been consistent in paying dividends uniformly every month so far in the current financial year.
These include Birla Sun Life MIP – Savings 5, DBS Chola MIP, ICICI Prudential MIP, Principal MIP and Principal MIP Plus. Nilesh Shah, Deputy Managing Director, ICICI Prudential AMC, stated that, “While the accumulated profits of earlier years have partially helped us in paying out the dividends consistently, it is our dynamic management of the scheme that is reaping the dividends even in the current market scenario.” This MIP is also the first MIP to declare the 100th consecutive dividend in the month of Feb ’09 since its launch in Nov ’00, according to the fund house.
The other schemes, however, are still struggling to keep away the market blues. While most schemes have been pretty irregular in paying dividends, there are some who have not made a single dividend payout in 2008-09. These include, DSP Blackrock Savings Manager – Aggressive & Moderate, Fortis MIP, HDFC MIP Short Term Plan, LIC MIP and Sundaram BNP Paribas MIP.
“Lack of distributable surplus has constrained us from paying dividends”, says Ramkumar K, Head – Fixed Income, Sundaram BNP Paribas AMC. “Though this scheme has 85% in debt, the losses in equities far exceed our profits from debt papers. Also after a brief rally, now even the returns from debt instruments have entered the negative terrain”, he added.
The desperation of most MIPs in paying dividends is evident from the fact their NAVs are currently trailing even below Rs 10/- per unit which is the price at which an investor purchases a unit at the new fund offer (NFO) stage. As Mr. Ramkumar stated that, “We cannot think of paying dividends unless our NAVs are restored to at least Rs 10. Regulations demand that dividend can be paid only from surpluses and not from the capital investment”.
As such the fund houses are not obligated to pay the monthly income which is paid subject to the availability of distributable surplus. A disclaimer to this effect is always stated in the offer documents and never read by the investors.
