Managed by the Dynamic team of Oscar Belaiche (who has a 17-year history with the fund) and Jason Gibbs, the Dynamic Dividend Fund aims for a stable monthly income stream with the potential for some capital growth.
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 Composite.
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
Fund company: Dynamic Funds
Fund type: Canadian Dividend & Equity Income
FundGrade Rating: A
FundGrade A+® Awards:2016, 2017
Style: Large Cap Blend
Risk level: Medium
Load status: Optional
RRSP/RRIF suitability: Excellent
Manager: Jason Gibbs since March 2007; Oscar Belaiche since July 2000
Fund code: DYN048 (Front-end load)
Minimum Investment: $500
Courtesy Fundata Canada Inc. © 2018. Dave Paterson, CFA, is the Director of Research, Investment Funds for D.A. Paterson & Associates Inc. This article is not intended as personalized advice. Investments mentioned are not guaranteed and carry risk of loss.