What is the impact of dividends on the NAV if the IDCW scheme has paid dividends?
When a mutual fund scheme under the IDCW (Income Distribution cum Capital Withdrawal) option declares and pays out dividends, the Net Asset Value (NAV) of the scheme falls. This drop is a direct result of the distribution of the scheme’s assets to investors.
Why does the NAV fall after dividend payout?
The IDCW payout is not a gain—it is a part of the scheme’s corpus that is distributed to unit holders. Since the fund's overall value decreases after paying out dividends, the NAV is adjusted downward to reflect this.
Example:
- NAV before dividend: ₹15
- Dividend declared: ₹1 per unit
- NAV after dividend: approximately ₹14
This change is automatic and reflects the reduced asset base of the fund after distribution.
What If...
| Scenario | Explanation |
|---|
| NAV drops after dividend payout | Normal behaviour—the NAV reflects the asset reduction equal to the dividend paid. |
| You purchased just before record date | You are eligible for the dividend but your NAV will immediately drop by the same amount. |
| You sold units before record date | You will not receive any dividend because you did not hold units on the record date. |
| You chose IDCW-Reinvestment option | The dividend amount is used to buy more units in the same scheme at the post-dividend NAV. |
Always compare IDCW and Growth options before investing. While IDCW gives periodic payouts, it doesn’t add extra value—just distributes part of your own investment.
Last updated: 16 Jun 2025
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