Market downturn dries up ELSS dividend payouts

The stock market carnage has not spared equity linked saving schemes
(ELSS), with the dividend declared by fund houses seeing a sharp fall
in FY 2008-09 from the previous fiscal. The average dividend declared
in FY 2008-09 was 28 per cent as against 44 per cent declared in FY
2007-08.
Twenty three schemes had declared dividend in the previous fiscal
ranging between 15 per cent and 200 per cent, while this fiscal this
number has come down to 9 schemes declaring dividend from 10 per cent
to 50 per cent. Only five fund houses announced divided in 9 ELSS
schemes. These include Birla Sun Life MF, HDFC Mutual, ICICI
Prudential AMC, Franklin India AMC and Taurus. This is in sharp
contract to the earlier year when 17 fund houses declared dividend in
23 ELSS schemes.
In FY 2008-09, Taurus Libra Tax Shield ruled the roost, giving
dividend three times at 10 per cent each in December, January and
March. HDFC Tax Saver and Birla Sun Life Tax Relief 96 gave highest
dividend o f 50 per cent in March and June respectively during the
current fiscal.
In FY 2007-08, Birla Sun Life Tax Relief 96 declared the highest
dividend of 200 per cent while HDFC Tax Saver disbursed 80 per cent
dividend. The ex-dividend NAVs for these two schemes stood at Rs 86.74
and Rs 58.092 on March 25, 2008 and March 8, 2008 respectively. The
same eroded to Rs 66.86 and Rs 26.155 on June 27, 2008 and March 6,
2009.
Most of the ELSS schemes have not booked any profit and hence they
don't have any surplus income. In such conditions, declaring dividend
is nothing but a gimmick to lure investors, fund distributors said.
"Bruised by the tumbling market, investors have already seen huge
erosion in their NAVs. Declaring dividend will bring down the NAV
further," said Hiren Dhakan, mutual fund analyst, Bonanza Portfolio.
Vinay Shukla, senior vice president, India Infoline, said, "MFs are
guided by the psychology of investors who feel ELSS schemes declaring
dividend are only worth investing and performing."
"Declaring dividend also involves overhead costs, which will directly
impact the NAV of a scheme later," added Shukla.

Find attached List of divided declared on ELS schemes in 2008-09: