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Fund in Focus: Dynamic Dividend Fund
2/20/2019 10:50:34 AM
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By Dave Paterson  | Wednesday, June 20, 2018


Managed by the Dynamic team that includes Oscar Belaiche (who has a 17-year history with the fund), the Dynamic Dividend Fund aims for a stable monthly income stream with the potential for some capital growth.

It currently pays a monthly distribution of $0.018 per unit (an annualized yield of about 1.5%), generated from a concentrated portfolio of what the managers believe to be best-in-class companies that pay a sustainable dividend and have the potential for growth.

They call their process “quality at a reasonable price,” which is a fundamentally-driven, bottom-up approach that focuses on identifying low-volatility firms with strong balance sheets, dominant industry positions, invested management, and a history of steadily growing free cash-flow and increasing shareholder yield.

The fund’s mandate allows for investment in common shares as well as preferred equity and trusts. It may also invest outside of Canada, and at the end of April the fund’s portfolio was allocated 33% to U.S. securities.

The portfolio is concentrated, yet still sufficiently diversified, recently listing 51 names, with the top 10 making up 28% of the allocation. With its focus on yield, top-sector exposures are what you’d expect, and the fund currently has allocated 20% to financials, 11% to industrials, 10% to healthcare, and 8% to consumer stapls. Underlying dividend yield of this portfolio is currently listed at 1.5%, which indicates that the distribution is expected to be fairly sustainable.

Performance has been strong, with the 5-year average annual compounded rate of return at 9.3% (as of April 30), compared with 8.1% for the S&P/TSX Composite.

Even more impressive, the fund’s volatility has been well below both the index and the Canadian Dividend & Income Equity peer group. It has also done an excellent job of preserving capital in down markets, experiencing roughly 40% of the losses of the broader market, on average. Conversely, the fund has also done a pretty decent job at keeping pace in a rising market; however, I would expect it to lag in a sharply rising market. Given the management team, the focus on quality, and the lower-than-average cost, I see this as a great core Canadian equity holding for most investors.

Dynamic Dividend Fund
Fund company
: Dynamic Funds
Fund type:
Canadian Dividend & Equity Income
FundGrade Rating: A
FundGrade A+® Awards: 2016, 2017
Style: Large Cap Blend
Risk level: Medium
Load status: Optional
RRSP/RRIF suitability: Excellent
Manager: Oscar Belaiche since 2000; Vim Thasan since 2015; Bill McLeod since 2017; Eric Benner since 2018; Tom Dicker since 2018
MER: 1.60%
Fund code: DYN048 (Front-end load)
Minimum Investment: $500

Dave Paterson, CFA, is the Director of Research, Investment Funds for D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due diligence on a variety of investment products. He is also the publisher of Dave Paterson’s Top Funds Report, offering regular commentary and in-depth analysis of Canada’s top investment funds. He uses a unique analytical approach to identify funds with strong, risk-adjusted returns, and regularly publishes his insights and analyses in Fund Library.

Notes and Disclaimer

© 2018 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice.


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