Bill Dye, Leith Wheeler’s Head of Canadian Equity, leads the fund management team
that looks for companies with quality management, stable earnings, and a
business model they are comfortable with. The portfolio is built on a
bottom-up basis, and potential investment candidates are put through a
fundamental, value-focused process that emphasizes return on equity, free
cash flow, and earnings growth. The managers take a longer-term outlook,
estimating how the business is likely to evolve over the next three to five
While dividend yield is important, the managers focus more on the total
return potential of a stock, rather than the absolute yield. The result is
a concentrated portfolio of around 30 names. The portfolio looks somewhat
similar to other dividend funds, yet has enough unique characteristics to
markedly differentiate it from its peers. It has a significant overweight
in financial services, which made up roughly 43% of the fund at Jan. 31. It
also carries a higher weight in industrials at 17% of assets. Where it
differs is in its big underweight in telecom and energy stocks, each
representing only about 9% of total holdings.
Top holdings as of Jan. 31 included
Bank of Nova Scotia (TSX: BNS),
Toronto-Dominion Bank (TSX: TD),
Canadian Natural Resources Ltd. (TSX: CNQ),
Canadian Imperial Bank of Commerce (TSX: CM), and
Canadian National Railway Co. (TSX: CNR).
Performance has generally been good, but like most equity funds, the fund
took a hit as markets corrected in late 2018, with the Series F units
posting a 3-year average annual compounded rate of return of 10.1% ending
Jan. 31. Still, that beat the 9.8% for the S&P/TSX Composite Index.
One potential drawback is that at 9.6%, the fund has higher average 3-year
standard deviation than the index and peer group. Still, even with the
higher volatility, it has delivered solid risk-adjusted returns,
outperforming in both up markets and down markets.
The fund is well positioned, with a valuation level well below the index
and a yield that is higher. Component holdings have all delivered earnings
growth superior to both the index and the peer group.
Costs are very reasonable, with an MER of 1.03% for the fee-based Series F units, available from dealers (1.50% for the do-it-yourself B Series). These metrics, combined with the disciplined management approach, lead me to conclude that the fund will continue to deliver excellent risk-adjusted returns.
Leith Wheeler Canadian Dividend Fund
Leith Wheeler Investment Counsel
Canadian Dividend & Equity Income
No load (fee based)
Bill Dye and the Leith Wheeler equity team since December
1.03% (F Series); 1.50% (B Series)
LWF031 (F Series, available through dealers); LWF019 (B Series, DIY)
$5,000 (F Series), $25,000 (B Series)
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.
Notes and Disclaimer
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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.