Bissett Canadian Dividend Fund

Analysis: For the past few quarters, the Bissett Canadian Dividend Fund has been one of our favourites in the category. Unfortunately, this adds to the surprise when we found out that Juliette John, one of the co-managers of the fund had left the company in early December.

Ryan Crowther, the other co-manager on the fund remains. Mr. Crowther has been with Bissett since 2008 and has been co-manager on the fund since mid 2011. Les Stelmach, who has been a part of the Bissett organization since 2006, will join him on the fund. Mr. Stelmach has been involved with the management of other Bissett funds including the Bissett Strategic Income Fund and the Bissett Energy Fund.

While any manager change is tough to assess, we don’t envision significant changes as a result of this departure. First, Mr. Crowther has had a hand in managing the fund for the past year and a half. Second, both of the current co-managers have extensive experience within Bissett and are very well indoctrinated in the Bissett way of managing money.

The fund will remain a concentrated portfolio of Canadian dividend paying stocks. They will continue to build the portfolio on a bottom up basis, using a “growth at a reasonable price” approach that looks for high quality companies with a history of repeatable and sustainable growth, that are trading at a discount to its growth prospects.

The fund will likely remain concentrated, holding in the neighbourhood of 35 names. As of September 30, the top ten holdings made up approximately 45% of the fund. Portfolio turnover has been modest, averaging less than 20% per year. However, in periods of high volatility, for example 2008 and 2009, the managers are not afraid to be very active, using the volatility as an opportunity to improve the quality of the portfolio.

Performance has been decent, approximately matching that of the S&P/TSX Composite Index. A notable exception was 2011, when the fund dramatically outperformed the index. Volatility of the fund is typically lower than both the index and the category average.

It pays a monthly distribution of $0.025 per unit, which at current prices works out to an annualized yield of approximately 2.7%. Looking at the yield of the underlying holdings and the expected return profile, it is our expectation that this level of distribution is sustainable going forward. It is also available in a T-Series, which pays out an annualized yield of approximately 8%. At this level, we do expect some degree of capital erosion over time.

While we don’t expect to see substantial changes as a result of this manager departure, there may be some. We will continue to monitor it to see if we notice any level of erosion to the risk reward profile of the fund.