CI Canadian Dividend Growth Fund

Analysis: Until recently, this Canadian dividend fund was known as the Castlerock Canadian Dividend Growth Fund. Managed by the team at Regina based Greystone Managed Investments, the fund invests in a concentrated portfolio of dividend paying stocks. While the focus is on Canada, it has the flexibility to look beyond our borders for interesting investment opportunities. As of October 31, the fund was 100% invested in Canada.

When evaluating potential investment candidates they look for large, established companies with strong balance sheets and predictable and growing levels of profitability. With this emphasis on dividends, it is not surprising to see that the portfolio is heavily weighted towards financials, real estate, and energy, which combined make up more than two-thirds of the fund. According to Morningstar Canada, the dividend yield of the underlying portfolio is 4.2%. Despite this relatively high yield, investors should not consider this fund an income fund as it pays no regular distributions.

Performance has been decent, with a five year return of 0.8% as of October 31, outpacing the broader S&P/TSX Composite, which lost 0.3% during the same period. The fund’s volatility is in line with the category average, but is significantly lower than the broader market. Considering this, we would expect that this fund will hold up relatively well in volatile markets, but will lag in a sharply rising market environment.

The biggest drawback to this fund is that it is expensive. It has an MER of 2.80%, which is well above the category average.

Considering all the above, we believe that this is a solid fund offering for most investors who are looking for large cap Canadian equity exposure. That said, we would likely favour the Fidelity Dividend, Bissett Canadian Dividend or CI Signature Dividend over this one, as each of those offers what we believe to be a more compelling risk reward profile.