| Fund Company | Mackenzie Financial Corporation |
| Fund Type | Canadian Dividend & Income Equity |
| Rating | A |
| Style | Mid Cap Value |
| Risk Level | Medium High |
| Load Status | Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Hovig Moushian since August 2001 |
| MER | 1.59% Investor Series 2.36% |
| Code | MFC 4147 – Investor Series Units MFC 2945 – Front End Units MFC 3665 – DSC Units |
| Minimum Investment | $5,000 – Investor Series $500 |
Analysis: This former income trust fund, which until March 2011 was known as the Mackenzie Saxon High Income Fund, is now an all cap Canadian dividend fund. It is managed using a very consistent style that is a pure bottom up, statistically grounded, and value oriented when evaluating opportunities. Like all value managers, they look for companies that are trading for less than their estimate of fair market value. In addition, any investment candidate must have a healthy balance sheet and pay a regular distribution.
It is a well diversified portfolio that holds about 55 names with the top ten making up approximately 26% of the fund. It has about one-third of the fund invested in large cap stocks with two-thirds invested in small and mid cap companies. Not surprisingly, given its emphasis on dividends, it is heavily weighted towards financials and energy, which combined make up about 53% of the fund. Typically the manager likes to be fully invested, but as of October 31, cash was sitting at just under 10%.
Assets in the fund are $630 million, which will still allow the team to invest meaningfully in the mid cap space. If the size of the fund continues to rise, they may be forced to take more positions in larger cap names.
The A Series of the fund pays a monthly distribution of $0.031 per month, which works out to an annualized yield of approximately 2.1% at current prices. According to Morningstar, the dividend yield on the underlying portfolio is 4.8%, which indicates that this level of distribution is sustainable going forward without eroding invested capital. Costs are reasonable with a 1.59% MER for the now closed Investor Series and 2.36% for the currently available A series.
After losing 28% in 2008, the fund has roared back posting first quartile returns since. The five year return of the fund is 7.7% while the S&P/TSX Composite Index lost 0.3% during the same period. Volatility has been lower than the index, but higher than the category average.
Considering the above, we expect that this fund will continue to deliver strong risk adjusted returns to investors, however we don’t expect that that double digit returns that it has delivered in the past are sustainable going forward.