Dynamic Dividend Fund

Analysis: Managed by the team of Oscar Belaiche and Jason Gibbs, they use their “Quality at a Reasonable Price” approach, which looks to identify best in class businesses that pay a dividend or distribution. They are looking for businesses that have strong balance sheets, a history of growing cash flows, and high earnings predictability, believing that these factors will allow for the sustainability of the dividend, while at the same time offering potential for growth.

The fund invests in a mix of common stock, equities, trusts and REITs. Currently, equities are heavily favoured, making up 83% of the portfolio while REITs make up just under 8%. Energy and financials are the two largest sectors, which is not surprising given the yield characteristics of many names in those sectors. Real estate tends to be well represented in the fund, as the managers believe it offers a good return profile and a strong yield.

While the focus is on Canada, the managers will invest in the U.S. to gain exposure to sectors that are not well represented in Canada. They will also look to take advantage of interesting investment opportunities there. The end portfolio tends to be fairly diversified holding approximately 50 names, with the top ten making up 36%.

Performance has been decent, posting an annualized five year return of 4.1% to February 28, compared to a 1.8% gain in the S&P/TSX Composite during the same period. However, the fund, as is the case with other funds that focus on quality, tends to lag in sharply rising markets. For example, in 2009 and 2012, when equity markets rallied, the fund was positive, but failed to keep pace with the index or its peer group. Volatility is in line with the category.

The cost for the A Series units is a very respectable 1.58%, which is well below the category average. It pays a monthly distribution of $0.018 which works out to an annualized yield of 2.2% at current prices. For those looking for a higher yield, it is available in a T-Series that pays $0.022 per month, which works out to be approximately 6% per year. However, the cost is higher, with an MER of 2.24%, which is right in line with the average.

While this is not our favourite fund in the category, it is not a bad option. We like this fund for more conservative investors looking to get some actively managed exposure to high quality, high yielding equity names. A good management team and low cost are other redeeming factors of this offering.