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Dividend funds cushioned market's punches

What are we looking for?

The stars among all Canadian stock funds in 2011. Given that the resource-heavy Canadian market struggled this past year amid concerns about slowing global growth, let's see what funds bucked the trend.

The screen

We searched for the 15 best performers among Canadian equity, Canadian focused equity (which can invest up to nearly 50 per cent in foreign stocks) and Canadian dividend and income equity funds. U.S. dollar, segregated and duplicate versions of funds were excluded.

What did we find?

Lots of funds stuffed with dividend-paying stocks.

BMO Guardian Monthly High Income II topped the list with a 10.4-per-cent gain, while RBC Canadian Equity Income rose 10.3 per cent.

"Dividend funds tend to perform better in a down market," said Michele Robitaille, a manager with Guardian Capital LP, which manages the BMO fund.

The companies in these funds tend to be mature firms with stable cash flow and cleaner balance sheets, and the regular dividends they pay offer a cushion against the market's punches.

The BMO fund benefited from having a "significant allocation" to real estate investment trusts, she said.

Winners included H&R, RioCan, Boardwalk and CAP REIT.

Energy names such as Keyera, Altagas, Veresen and TransCanada also helped performance.

REITs and other high-yielding securities could suffer a bit of a pullback if the global economy improves, and the appetite for risk increases, said Ms. Robitaille.

But she is not anticipating that to happen soon.

Given the uncertainties in the global economy, including the euro zone debt crisis and political gridlock in the United States, "we are still pretty cautious," she said.

The 2011 stars also included two Canadian-focused equity funds.

Fidelity Canadian Large Cap, which is managed by Daniel Dupont of Fidelity Investments Canada, gained 10.3 per cent (Mr. Dupont took over last March from Brandon Snow who jumped ship to join CI Investments Inc.).

Manulife Canadian Focused Class, which is run by James Cole of Portland Investment Counsel, gained 5.5 per cent.

Both of these funds have a big chunk of assets in U.S. stocks - a good move given that the American market fared better than its Canadian counterpart last year.



ASSETS*To December 31, 2011Calendar Year Returns
FUNDCATEGORYMER(in $ mil.)1 YEAR3 YEARS5 YEARS201020092008
BMO GDN Mthly High Income IICdn. Div. & Income Equity2.35831.210.41%21.35%6.44%20.73%34.07%-27.86%
RBC Canadian Equity IncomeCdn. Div. & Income Equity2.08916.810.34%29.71%14.16%23.99%59.52%-18.82%
Fidelity Canadian Large Cap-ACanadian Focused Equity2.49175.910.31%21.00%7.13%17.33%36.88%-29.91%
McLean Budden Div. Income Equ DCdn. Div. & Income Equity1.2534.59.80%16.42%3.27%12.84%27.38%-25.70%
Dynamic Equity IncomeCdn. Div. & Income Equity2.151314.99.62%20.41%7.17%22.05%30.48%-24.60%
Renaissance Millennium High IncmCdn. Div. & Income Equity2.52441.37.63%15.21%1.97%16.55%21.91%-31.51%
Dynamic DividendCdn. Div. & Income Equity1.58521.16.80%11.81%2.20%10.85%18.08%-24.96%
Claymore S&P/TSX Cdn. Div. ETFCdn. Div. & Income Equity0.64632.46.39%19.22%4.63%15.21%38.24%-30.41%
Sentry Canadian IncomeCdn. Div. & Income Equity2.701304.16.07%18.69%6.90%18.56%32.95%-22.77%
Omega Preferred EquityCdn. Div. & Income Equity1.46332.25.55%13.35%8.96%26.62%-15.99%
Manulife Canadian Focused ClCanadian Focused Equity2.7538.25.47%13.36%-1.43%6.28%29.96%-26.82%
Investors Cdn Equity Incme Fnd ACdn. Div. & Income Equity2.74617.35.27%24.14%9.07%23.06%47.67%-25.40%
Claymore S&P/TSX Pref Share ETFCdn. Div. & Income Equity0.50857.95.26%12.30%6.60%26.24%-17.11%
Sentry Growth & IncomeCdn. Div. & Income Equity2.76264.35.22%16.62%19.51%26.11%
Manulife Preferred IncomeCdn. Div. & Income Equity2.4462.54.66%5.22%
S&P/TSX Total Return-8.71%13.18%1.30%17.61%35.06%-33.00%
S&P/TSX Equity Income Index-0.61%
S&P 500 Composite ($ Cdn)2.25%4.96%-5.00%7.18%5.51%-23.76%
Source: Globe Investor, company reports

© 2007 The Globe and Mail. All rights reserved.

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