April Recap:
For the month of April, the Caldwell U.S. Dividend Advantage Fund (“UDA” or “Fund”) declined -2.2% versus a decline of -2.6% for the S&P 500 Total Return Index (“Index”)1. From a sector standpoint, Utilities, Energy, and Consumer Staples were relative outperformers, whereas, Real Estate, Information Technology, and Healthcare underperformed.
Top performers in the month of April were Tetra Tech (“TTEK”), FTAI Aviation (“FTAI”), and Eli Lilly (“LLY”). TTEK surged as it exceeded its earnings expectations and raised its guidance for the remainder of the year, driven by the company being able to secure a record second-quarter backlog. FTAI continued to rerate higher as the company is benefitting from a robust demand backdrop as a result of Boeing facing production challenges, which are leading to higher lease rates. LLY also continued to perform well as the demand for its blockbuster weight-loss drug continues to outpace supply due to capacity constraints. However, availability should improve throughout 2024 as new manufacturing capacity comes online. Overall, we see a long growth runway and continued support for the stock’s multiple re-rating, given popular in-production new products as well as other promising drugs in the pipeline.
During the month of April, the Fund initiated positions in Matador Resources (“MTDR”), Permian Resources (“PR”), and Houlihan Lokey (“HLI”).
MTDR is engaged in the exploration, development, production, and acquisition of oil and natural gas resources in the U.S. It focuses on oil and natural gas shale and other unconventional energy projects. The company has differentiated assets, strong production growth, management with significant inside ownership and a history of execution, and its strong innovation is driving a more attractive production growth profile relative to its peers.
PR is an oil and gas company involved in the exploration, development, and production of crude oil, natural gas, and natural gas liquids. The company offers a high-quality growth profile, maintaining a significant inventory with a low degradation risk.
HLI engages in the provision of investment banking services in the segments of Corporate Finance, Financial Restructuring, and Financial and Valuation Advisory. The investment bank is well positioned to benefit from rising corporate bankruptcies and over $10 trillion of global corporate debt maturities over the next three to five years.
The Fund held an 8.2% cash weighting at month-end. While we remain mindful of the macro environment, the Fund employs a bottom-up investment approach designed to seek out attractive investment opportunities in any market. Over the long run, given its unique momentum-driven investment approach and focus on well-managed, dividend growth companies, we believe UDA is well-positioned to provide strong performance by way of both attractive regular monthly distributions and long-term capital appreciation potential. We expect that our approach to dividend growth investing should continue to provide a means of generating compelling risk-adjusted returns for our investors over the long term.
1All returns (for the fund, individual stocks and sectors) are in total return, Canadian dollar terms. All stock returns represent performance for the full period noted. All fund returns are in respect of Series F.
Standard performance as at April 30, 2024:
Caldwell U.S. Dividend Advantage Fund (Series F): 1 Year: 17.7%, 3 year: 9.2%, 5 year: 9.8%, Since Inception (June 19, 2015): 9.0%.
S&P500 Total Return Index: 1 Year: 24.2%, 3 year: 12.1%, 5 year: 13.7%, Since Inception (June 19, 2015): 13.8%.
2Actual investments, first purchased: TTEK 5/12/2022, FTAI 12/5/2023, LLY 9/14/2023.
All data is as of April 30, 2024 sourced from Morningstar Direct or S&P Capital IQ, unless otherwise indicated. Fund returns are from FundData. UDA, Index total return numbers, sector returns and individual stocks returns are in CAD terms. The Fund was first offered to the public as a closed-end investment since May 28, 2015. Effective November 15, 2018 the Fund was converted into an open-end mutual fund such that all units held were redesignated as Series F units. Performance prior to the conversion date would have differed had the Fund been subject to the same investment restrictions and practices of the current open-end mutual fund.
The information contained herein provides general information about the Fund at a point in time. Investors are strongly encouraged to consult with a financial advisor and review the Simplified Prospectus and Fund Facts documents carefully prior to making investment decisions about the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Rates of returns, unless otherwise indicated, are the historical annual compounded returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated. The payment of distributions should not be confused with a fund’s performance, rate of return or yield. If distributions paid are greater than the performance of the fund, your original investment will shrink. Distributions paid as a result of capital gains realized by a fund, and income and dividends earned by a fund, are taxable in your hands in the year they are paid. Your adjusted cost base (“ACB”) will be reduced by the amount of any returns of capital and should your ACB fall below zero, you will have to pay capital gains tax on the amount below zero.
Publication date: May 16, 2024.