Sentry Small / Mid Cap Income Fund

Analysis: This is an update to our review which was published on March 12, 2012. You can read the original review at https://paterson-associates.com/2012/03/sentry-small-mid-cap-income-fund.

Unlike a lot of traditional small and mid cap focused fund, the Sentry Small / Mid Cap Income Fund pays investors a monthly distribution of $0.05 per unit. As of May 31, this translates into an annualized yield of 4.2%. In addition to the distributions, the fund has shown strong growth potential. For the five year period ending May 31, the fund has earn an annualized compound return of 10.6% per year, compared with the BMO Canadian Small Cap Index which has lost an average of 3.8% per year.

Michael Simpson and Aubrey Hearn have been increasing the U.S. exposure recently. They believe that the U.S. market is playing catch up from a down and out scenario and they are finding many investment opportunities there that just aren’t available in Canada. The maximum foreign exposure is set at 30%, and as of April 30, it was 19%. Their outlook for Canada is positive, but more muted than for the U.S. Much of Canada’s growth will be dependent on the demand for commodities coming out of Asia and the U.S., which is likely to be a question mark for the rest of the year.

Regardless, the team remains committed to their strategy. They believe that companies that increase dividends over time tend to outperform those that don’t. They refuse to chase quick returns and remain focused on quality companies that offer diversification with good valuations and a history of dividend growth.

We are reaffirming our $$$$ rating on the Fund.