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Mutual Fund News

Rally in financials helps funds outperform


The best-performing Canadian dividend and income funds this year.

It's interesting to see how these investments are faring, given that dividend-paying stocks took the spotlight after Manulife Financial Corp. this week slashed its quarterly payout to 13 cents from 26 cents. The move was intended to boost capital levels above the regulatory minimum, and conserve cash for acquisition opportunities, the insurer said.


We screened the Canadian dividend and income fund category for the top 30 gainers so far this year to Thursday. Segregated and pooled funds were excluded. We also left out the U.S.-dollar and duplicate versions, and those funds with less than a one-year record.


Seven funds nicely outperformed the 22.6-per-cent S&P/TSX total return index. And some even beat this benchmark over the longer haul.

Among the ones outperforming this year were two low-fee, exchange-traded funds (ETFs). The top performer was the iShares CDN Value ETF, which posted a robust 30.5-per-cent return. This ETF, which includes stocks and income trusts, has benefited from a rally in financials.

And the iShares CDN Dividend ETF, whose top 10 holdings includes Canada's six largest banks, posted an increase of 26.1 per cent. In the group of seven, PH&N Canadian Equity-D, PH&N Dividend Income-D and TD Dividend Growth have also beaten the annualized 8.7-per-cent gain by the S&P/TSX total return index over 15 years.

VPI Cardinal Canadian Equity Pool - a mutual fund despite its name - registered the best number so far this year among actively managed funds. The value-oriented fund typically holds 20 high-quality, dividend-growing stocks.

The fund gained 26.4 per cent this year with the help of a whack of financials, which now stands at 59 per cent. "While others were fearful [of the sector], we saw an opportunity," said David Atkins, the fund's co-manager.

Manulife Financial is among stocks in his financial basket. "I wasn't surprised, but I was disappointed" by the dividend cut, Mr. Atkins said. "But we are going to continue buying Manulife because the stock is too cheap to sell. It trades at 11.5 times normalized earnings, and is yielding 2.3 per cent."

The fund also has a 28 per cent weighting in energy stocks, including Petro-Canada and Suncor Energy Inc. It benefited from Suncor's takeover of Petro-Canada. While the fund was underweight this sector last year, Mr. Atkins began buying back more energy stocks earlier this year when crude was trading at its lows. "We still like the energy theme, and see potential here."

Top Canadian Dividend and Income Equity Funds YTD Aug. 6, 2009
(As of June 30)Latest(Aug. 6)(July 31)% returns (as of July 31, 2009)
Fund name Assets ($-mil)MERYTD % rtnYTD % rtn1-yr3-yr5-yr10-yr15-yr
iShares CDN Value Index31.80.5030.533.3-11.8
VPI Cardinal Canadian Equity Pool*148.92.1726.429.1-5.90.7
iShares CDN Dividend Index388.00.5026.128.4-6.20.3
PH&N Canadian Equity-D804.81.1225.926.9-14.5-
PH&N Dividend Income-D1,908.81.1123.625.3-9.0-
CI Signature Dividend1,310.31.7923.121.3-2.1-
TD Dividend Growth2,714.41.9223.025.0-10.2-
Omega Preferred Equity163.51.4321.620.34.9
Bissett Canadian Dividend-F7.61.3121.322.4-5.2-0.27.2
Claymore S&P/TSX Pref Share ETF166.120.919.75.4
Fidelity Dividend-A186.82.2520.321.1-5.51.7
HSBC Dividend Income-I401.31.9120.120.8-11.1-
Claymore Dividend & Income ETF44.80.6020.119.8-13.1
Mackenzie Maxxum Dividend1,306.12.3819.320.3-9.3-
IA Clarington Dividend Growth-T670.22.5019.019.6-10.40.0
CIBC Dividend Growth792.01.9418.819.4-13.0-
IA Clarington Canadian Dividend1,177.02.6918.619.2-12.3-1.03.2
RBC Canadian Dividend8,520.41.7018.219.8-
Acuity Growth and Income228.82.9117.717.5-20.2-7.24.1
Manulife Dividend Fund497.32.3017.417.4-8.8-2.34.3
Quebec Professionals Dividend29.117.318.7-12.2
Omega High Dividend85.51.9316.818.0-11.0
Scotia Canadian Dividend1,983.71.6416.717.2-13.6-
Mackenzie Maxxum Dividend Growth874.52.3816.417.3-7.9-
IG Mackenzie Maxxum Dividend Gro-A916.32.6616.117.1-8.3-3.71.5
imaxx Canadian Dividend4.52.4916.116.7-15.4-0.3
AIC Dividend Income143.32.4216.116.9-9.6-4.6
Acuity Dividend82.12.7815.415.6-20.6-6.3
AGF Dividend Income551.22.0615.215.1-14.9-4.25.6
Stone & Co. Div Growth Cls Can A145.52.8614.815.1-
S&P/TSX Composite Index20.120.0-20.6-
S&P/TSX Total Return22.622.5-17.7-
* Requires minimum initial investment of $25,000.
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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