O’Leary Canadian Dividend Fund

Analysis: Managed by Connor O’Brien and Steve DiGregorio of Stanton Asset Management, this Canadian dividend fund uses a mix of top down macro analysis and bottom up security selection. The top down macro analysis is used to help zero in on most attractive sectors and security types. Once this is determined, they then use a fundamentally driven, bottom up security selection process with the goal of finding high quality companies with strong balance sheets and cash flows that are trading at a discount to their estimate of its true worth.

They can invest in companies of any size, but tend to focus on large and medium sized companies. They can invest up to 30% outside of Canada, and at the end of January, there was just under 20% invested abroad. It was also nearly fully invested, holding just under 2% in cash. Their investment process is quite active, with annual portfolio turnover averaging more than 100% since its launch.

Performance has been decent, with a three year gain of 7.49%, beating the S&P/TSX Composite Index, but lagging the Dow Jones Canada Select Dividend Index. Shorter term numbers have been stronger, gaining 13.4% for the past year, which outperformed both indices, and finished in the second quartile. Volatility has been slightly lower than the category average. In addition, it is a good source of cash flow, paying a monthly distribution of $0.0315 per unit, which works out to an annualized yield of more than 3%.

The costs are reasonable with an MER of 1.73%, largely because O’Leary is absorbing a large portion of the expenses. Without them picking up some of the tab, the MER would have been in the 2.7% range.

This isn’t a bad fund per se. Based on my analysis, I would expect it to produce average returns with slightly below average risk. It’s just that I believe that there are better dividend income funds available, including RBC Canadian Equity Income, Sentry Canadian Income or Mackenzie Canadian All Cap Dividend.