It currently pays a monthly distribution of $0.018 per unit (an annualized
yield of about 1.5%), generated from a concentrated portfolio of what the
managers believe to be best-in-class companies that pay a sustainable
dividend and have the potential for growth.
They call their process “quality at a reasonable price,” which is a
fundamentally-driven, bottom-up approach that focuses on identifying
low-volatility firms with strong balance sheets, dominant industry
positions, invested management, and a history of steadily growing free
cash-flow and increasing shareholder yield.
The fund’s mandate allows for investment in common shares as well as
preferred equity and trusts. It may also invest outside of Canada, and at
the end of April the fund’s portfolio was allocated 33% to U.S. securities.
The portfolio is concentrated, yet still sufficiently diversified, recently
listing 51 names, with the top 10 making up 28% of the allocation. With its
focus on yield, top-sector exposures are what you’d expect, and the fund
currently has allocated 20% to financials, 11% to industrials, 10% to
healthcare, and 8% to consumer stapls. Underlying dividend yield of this
portfolio is currently listed at 1.5%, which indicates that the
distribution is expected to be fairly sustainable.
Performance has been strong, with the 5-year average annual compounded rate
of return at 9.3% (as of April 30), compared with 8.1% for the S&P/TSX
Even more impressive, the fund’s volatility has been well below both the
index and the Canadian Dividend & Income Equity peer group. It has also
done an excellent job of preserving capital in down markets, experiencing
roughly 40% of the losses of the broader market, on average. Conversely,
the fund has also done a pretty decent job at keeping pace in a rising
market; however, I would expect it to lag in a sharply rising market. Given the management team, the focus on quality, and the lower-than-average cost, I see this as a great core Canadian equity holding for most investors.
Dynamic Dividend Fund
: Dynamic Funds
Canadian Dividend & Equity Income
FundGrade A+® Awards:
Large Cap Blend
Manager: Oscar Belaiche since 2000; Vim Thasan since 2015; Bill McLeod since 2017; Eric Benner since 2018; Tom Dicker since 2018
DYN048 (Front-end load)
Dave Paterson, CFA, is the Director of Research, Investment Funds for
D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due
diligence on a variety of investment products. He is also the publisher
Dave Paterson’s Top Funds Report,
offering regular commentary and in-depth analysis of Canada’s top
investment funds. He uses a unique analytical approach to identify
funds with strong, risk-adjusted returns, and regularly publishes his
insights and analyses in Fund Library.
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only and is not intended as personalized investment advice.