Sentry Canadian Income Fund

Analysis: This is an update to our review which was published on March 9, 2012. You can read the original review at https://paterson-associates.com/2012/03/sentry-canadian-income-fund.

For investors who are looking for a regular distribution and the potential for some capital gains, it doesn’t get a whole lot better than this fund. Each month, investors are paid a distribution of $0.0775 per unit, which as of May 31 works out to an annualized yield of 5.8%. In addition to the distributions, the fund has shown strong growth. In 2011, it gained 6.1%, while the S&P/TSX Composite Index lost 8.7%. It has finished in the first quartile in every year, with the exception of 2006, where its 4.4% gain landed it in the bottom quartile.

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 24%. 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.