Bissett Dividend Income

Analysis: We were somewhat surprised when we were told that longtime manager Juliette John had resigned from Bissett back in early December. Ryan Crowther, the other co-manager on the fund remains. He 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 to the investment philosophy or process as a result of this departure. Mr. Crowther has had a hand in managing the fund for the past year and a half. Furthermore, 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 continue to be an equity focused balanced fund that invests in Canadian and U.S. dividend paying stocks with some exposure to fixed income investments. The equity sleeve of the fund will be managed using Bissett’s GARP approach that looks to find well high quality companies that have a demonstrated history of earnings growth that they believe is both sustainable and repeatable. In the current environment, equity holdings tend to be defensive and yield oriented investments that are expected to hold up better in a volatile market. Fixed income holdings are expected to be predominantly corporate bonds.

As of September 30, the portfolio held 15% in Corporate bonds, 64% in Canadian equity and 18% in U.S. equity. Portfolio turnover has been modest, averaging around 10% per year.

Performance has been close to that of the index, except for 2011, when it dramatically outperformed. Volatility is lower than the broader market and category average.

It pays a monthly distribution of $0.055 per unit, which based on current prices works out to an annualized yield of approximately 2.4%, which should be sustainable going forward. It is also available in a T-Series version with pays out a higher distribution, bringing the yield up closer to 8%, which will likely result in some level of capital erosion, based on the expected risk reward profile of the fund.

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.