| Fund Company | IA Clarington Investments Inc. |
| Fund Type | Canadian Dividend & Income Equity |
| Rating | $$$ |
| Style | Value |
| Risk Level | Medium |
| Load Status | Optional front or back-end load |
| RRSP/RRIF Suitability | Excellent |
| TFSA Suitability | Excellent |
| Manager | George Frazer since 1950
Douglas Kee since 2006 |
| MER | 2.43% |
| Code | CCM 1300 – Front End Units
CCM 1400 – DSC Units |
| Minimum Investment | $500 |
Analysis: This is an update to our review which was published on October 14, 2011. You can read that review at https://paterson-associates.com/?p=106. Since October, there have been no material changes to the fund.
The Fund has been managed by George Frazer and his team at Leon Frazer & Associates Investment Counsel since 1950 using a very value focused approach. The team looks for companies with a demonstrated history of growing dividends paid to investors over time based on their belief that “dividend increases drive growth in both income and capital and offer capital protection in volatile markets.” The team also looks for a history of strong earnings, cash flows, and quality management. Valuation is also a concern as the team focuses only on the stocks that they feel are reasonably priced based on their estimate of value and the growth prospects.
The portfolio is fairly concentrated, holding approximately 35 companies with the top 10 making up nearly 60% of the total fund. Given the fund’s focus on dividends it is not surprising that the fund is heavily weighted towards financial services, utilities and communications. What may be surprising to some is the fund’s exposure to energy. However, this is a result of many of the pipeline stocks being considered energy. Of the 35% of the fund that is invested in energy, nearly half of it is invested in the more conservative, income generating pipeline stocks.
Performance for the fund has been decent, gaining 4.1% since last October, handily outpacing the S&P/TSX Composite which gained 1.8% during the same time period. While this level of outperformance is respectable, it placed the fund in the third quartile.
This has not changed the management team’s process. They have no intention of making any major tactical shifts in the short term and will continue to take a long term view and focus on high quality Canadian dividend paying companies.
They remain optimistic for 2012 given the dividend growth that has been exhibited by the fund’s holdings in the past year or so. Many of the fund’s holdings have increased dividend payouts in the past year, but the market has yet to reward them through increased share prices. Historically, the markets tend to pay for dividend increases over time, and they expect that this time will be no different, and recent dividend increases will be rewarded.
We are reaffirming our $$$ rating on the fund. We do expect that it will lag in “hot” markets, but should provide strong absolute and risk adjusted returns over the long term, with lower than category volatility.