The managers look for potential investments among the higher-yielding names
of the S&P/TSX Composite Index. While dividends are a key criterion in
their research, they are careful not to sacrifice quality to chase yield.
The fund holds around 40 names, with the top 10 making up about a third of
As of Feb. 28, top holdings included
Toronto-Dominion Bank (TSX: TD)
at a 5.5% portfolio weighting,
Bank of Nova Scotia (TSX: BNS)
Royal Bank of Canada (TSX: RY)
Pembina Pipeline Corp. (TSX: PPL)
at 4.2%, and
Enbridge Inc. (TSX: ENB)
The fund has significant exposure to higher-yielding energy names,
financials, and REITs. Combined, these three sectors make up more than 70%
of the fund. As a result, concentration is a potential concern with the
fund, and in large part helps explain recent performance.
With energy names under pressure in 2014 and 2015, so too was this fund.
But in 2016, with both energy issues and REITs showing renewed strength,
this offering had been one of the stronger performers. In 2016, the fund
returned 19.79%, putting it in the second quartile for calendar year
performance. Longer term, performance has been around average, with a
5-year average annual compounded rate of return of 6.23%, compared with
7.20% for the S&P/TSX Composite Total Return Index. However, both
volatility, at a 3-year average standard deviation of 7.75%, and downside
participation have been lower than the peer group, resulting in
better-than-average risk-adjusted returns.
Looking ahead, increasing stability in the energy market should continue to
be a tailwind for this fund. I would expect that over the longer term, this
fund should continue to deliver average or better returns with lower
volatility. It can also be a great source of cash flow, paying a monthly
distribution of $0.06 per unit, which works out to an annualized yield of
BMO Monthly High Income Fund II Advisor Series
BMO Investments Inc.
Canadian Dividend & Income Equity
Large Cap Blend
Kevin Hall since March 2012; Michelle Robitaille since March 2012
GGF 619 (front-end load)
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
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.
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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.