The portfolio is somewhat concentrated, typically holding less than 40
names. Given the total-return focus, the fund tends to invest in much
smaller companies than many other dividend funds, which tend to focus on
big blue-chip dividend payers like the banks and pipelines. The average
market cap of the Canadian Dividend Income & Equity category is in the
$35 billion range. This fund, however, skews much smaller, with an average
market cap of just over $11 billion.
The sector mix, which is the result of the stock selection process, is also
significantly different, being underweight in industrial services, and
dramatically overweight in consumer names, energy, and financial services.
At the end of August, not a single Canadian bank appeared in the top 15
The portfolio also has more of a growth bent to it, with the managers
looking for what they believe are value-creating businesses with
identifiable competitive advantages that will allow the companies to
generate free cash flow, which they can reinvest or pay out to shareholders
in the form of dividends. Valuation is a concern, but less so than with
many other dividend funds.
The manager is very tactical with cash, letting it rise if suitable
opportunities are unavailable. At the end of August, the fund held 4.9% in
cash. Managers are also very active, more so in volatile markets, using
selloffs to pick up attractive names at great prices.
The fund lags its peers in performance this year, but has been very strong
over the past five years, delivering an average annual compounded rate of
return of 12.0% to Aug. 31, handily outpacing its peers. Volatility has
been well below both the index and peer group. The managers note that
currently, the overall risk appetite remains high, making it difficult to
find attractive opportunities, so they remain defensively positioned.
Because the fund pays a modest monthly distribution of $0.03 (a 1.5%
annualized yield), I wouldn’t use it as a meaningful source of income.
However, it is an excellent dividend-focused fund for the long term. But
because it is so different from the benchmark, performance may also be
significantly different, both to the upside and downside. Given this
proviso and its more mid-cap focus, I’d be reluctant to use the fund as a
core holding. But it could be a great risk-diversifier if used in a
CI Cambridge Canadian Dividend Fund
Canadian Dividend & Income Equity
FundGrade A+ Awards:
2015, 2016, 2017
Mid Cap Growth
Stephen Groff since July 2015
CIG11112 (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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