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A safety cushion in dividend funds? Think again

What we're looking at

It's Day Three of our week-long look at how the mutual funds that were massacred last year have done in 2009. Today, dividend funds.

Our screen

Funds in the Canadian dividend and income equity category with assets of $25-million or more were ranked according to the size of their losses in 2008. To see how each fund has rebounded, we've displayed the return for the year through Nov. 26.

For a longer-term view on the performance of these funds, we have included five-year quartile numbers. Quartiles divide funds in a category into four groups; first quartile is best, fourth is worst.

What we found

Think owning dividend stocks will provide some cushioning when stock markets plunge? Don't count on it.

The funds in today's screen are loaded with all kinds of blue-chip, dividend-paying stocks, and many of them got beat up last year. It's worth noting that the S&P/TSX composite total return index, with roughly half its assets in resource stocks that pay little or nothing in dividends, fell 33 per cent last year. A few of our funds lost more than that, and many were only modestly better.

It's interesting to see a couple of names on this list from Phillips, Hager & North, a conservative money manager owned by Royal Bank. It's similarly interesting to see a few dividend-focused exchange-traded funds (ETFs), which are index funds that trade like stocks. One of the criticisms made against ETFs is that they do worse in a bear market than do traditional mutual funds. Our list shows us that ETFs (look for the iShares and Claymore names) and traditional funds were both big losers last year. It also shows that dividend ETFs bounced back exceedingly well in 2009. Better, in fact, than pretty much all of the mutual funds on the list.

ETFs have no permanent advantage, though. shows us that dividend funds averaged 9.7 per cent annually over the past 15 years to Oct. 31, compared to 8.6 for the S&P/TSX composite total return index (dividends included).


Dividend Funds as of Nov. 26, 2009
Assets ($-mil)Latest% rtn% rtnQuartile
Fund name (as of Oct. 31)MER2008Nov. 26Oct. 31
PH&N Canadian Equity-D820.81.12-35.529.51
iShares CDN Value Index38.30.50-34.038.2
Standard Life Cdn Dividend Growth-A1,507.02.01-33.118.33
Acuity Dividend77.22.78-33.020.8
PH&N Dividend Income-D1,943.81.11-32.527.23
Renaissance Millennium High Income511.12.36-31.515.14
Investors Cdn Dividend Growth C38.22.85-31.218.5
iShares CDN Dividend Index462.50.50-30.931.1
Mackenzie Maxxum Dividend1,394.42.38-30.823.54
VPI Cardinal Canadian Equity Pool174.92.14-30.829.0
Claymore S&P/TSX Cdn Dividend ETF89.60.64-30.431.2
TD Dividend Growth3,341.81.92-29.928.71
HSBC Dividend Income-I426.81.92-29.924.03
Acuity Growth and Income231.52.91-29.924.03
CIBC Dividend Growth830.71.96-29.123.81
Renaissance Cdn Dividend Income148.62.34-28.914.83
Standard Life Dividend Income-A38.72.44-28.813.2
IG Mackenzie Maxxum Dividend Gro-A962.02.68-28.522.04
Mackenzie Maxxum Dividend Growth918.92.38-28.222.44
IA Clarington Canadian Dividend1,153.22.72-28.124.42
AGF Dividend Income566.32.06-28.021.11
IA Clarington Dividend Inc-T4282.71.89-27.816.44
Scotia Canadian Dividend2,118.11.66-27.721.51
Renaissance Dividend90.42.47-27.517.03
Ethical Canadian Dividend227.62.59-27.213.71
BMO GDN Dividend Growth Mutual466.32.00-27.115.62
AIC Dividend Income134.92.42-27.019.64
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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