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Analysis: With assets of just under $13 billion, the RBC Canadian Dividend Fund is one of the largest funds in the country. Given the monumental task of managing this behemoth is the duo of Stuart Kedwell and Doug Raymond who took over the management of the fund in April 2007.
In managing the fund, the team uses a quantitative screening process that examines a number of factors, eliminating stocks that do not meet the team’s criteria. Typically, they are looking for companies that have a history of providing consistent and reliable gains for shareholders. They like companies with high margins and above average returns on capital that are reasonably valued relative to their potential growth prospects.
Given the dividend mandate, it’s not surprising to see the portfolio is filled with your usual suspects, namely the banks, pipelines, and utility companies. The top five holdings are the big five banks which makes up more than one quarter of the portfolio. The top 10 names make up just under 42% of the portfolio. The fund pays a quarterly distribution, which has ranged between $0.14 and $0.15 per quarter in the past year. This works out to a yield of approximately 1.4% based on recent fund prices. The fund is very focused in Canada, and can invest no more than 25% of its assets in foreign securities.
Performance has lagged the S&P/TSX Composite Index in all time periods, and the fund has landed mostly in the third quartile during the past four years. Volatility of the fund is lower than the broader market, and is in line with the Canadian Dividend and Income Equity category average.
The costs for this fund are reasonable within MER of a 1.77%, which is well below the category median of 2.2%.
Based on all of the above factors, it is our opinion that there are better options available for investors interested in a Canadian dividend fund offering.