Last updated: Dec-13-2018

    
 
Fund in Focus: CI Cambridge Canadian Dividend Fund
12/13/2018 10:28:13 PM
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DUE DILIGENCE
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By Dave Paterson  | Wednesday, September 19, 2018


 



The CI Cambridge Canadian Dividend Fund is a multi-year FundGrade A+® Award winner, and currently carries a FundGrade A Grade for August. A clue to the fund’s outperformance is its tilt towards smaller-cap companies. Manager Stephen Groff looks at total return instead of just dividends, searching for quality companies that pay a fair dividend and offer compounding returns.

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 holdings list.

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 well-diversified portfolio.

CI Cambridge Canadian Dividend Fund
Fund company:
CI Investments
Fund type:
Canadian Dividend & Income Equity
FundGrade: A (August)
FundGrade A+ Awards: 2015, 2016, 2017
Style: Mid Cap Growth
Risk level: Medium
Load status: Optional
RRSP/RRIF suitability: Good
Manager: Stephen Groff since July 2015
MER: 2.42%
Fund code: CIG11112 (Front-end load)
Minimum investment: $500

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 of 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.

Notes and Disclaimer

© 2018 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice.

 

 
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