August 2021 | Caldwell U.S. Dividend Advantage Fund Commentary

The Caldwell U.S. Dividend Advantage Fund Series F (“UDA”) returned 2.3% in the month of August versus 4.3% for the S&P 500 Total Return Index¹. Despite accelerating COVID-19 case growth and widespread supply chain issues, markets moved higher on the back of solid earnings, positive guidance outlooks and a recovery in mega-cap tech stocks following weak performance earlier in the year. The Fund’s performance benefited from allocations to the Industrial, Information Technology and Health Care sectors while the Consumer Discretionary sector detracted from performance.

Top contributors to UDA performance were Tetra Tech Inc. (“TTEK” +9.2%), CDW Corporation (“CDW” +11.0%) and Motorola Solutions (“MSI” +10.4%)².

TTEK is a leading global provider of consulting and engineering services with a focus on water and environmental projects. Exposure to these high priority investment areas and greater certainty of funding at the state and local government level led management to raise their medium-term market growth outlook. The company’s proprietary data analytics software, while still a small part of the overall business, continues to see strong demand and should help drive margin upside over time. Lastly, TTEK continues to execute on its acquisition strategy noting a strong pipeline of add-on opportunities that should be accretive to earnings.

CDW is one of the largest U.S. information technology re-sellers, offering more than 100,000 products and services from over 1,000 vendor partners. A strong beat-and-raise quarter demonstrated how CDW continues to leverage its scale to take share from smaller competitors. In addition to being relatively less impacted by supply constraints, management noted an improved ability to pass through input cost inflation which led to better than expected margin performance. Similar to TTEK, CDW also noted a pick-up in projects at the State and Local level as Federal stimulus money starts to flow through. Business re-openings and return to office also mean previously stalled projects/new project starts are expected to return with accelerating cadence throughout the year.

MSI is a leading provider of land mobile radios, security cameras, and mission-critical command center software primarily used by first responder/law enforcement, hospitality & entertainment and education end markets. The company reported a beat-and-raise quarter and similar to other top contributors, should see a solid multi-year growth tailwind from stimulus-related deals. Strong demand in the video security business also led management to raise the full year outlook noting a strengthening pipeline and continued share gains in the body-worn camera segment against the leading competitor. Lastly, given the company’s mission critical end customers (i.e. police, first responders), management noted success in moving MSI up the priority customer list at key suppliers, helping navigate supply shortages better than competitors.

¹Standard performance as at August 31, 2021:

Caldwell U.S. Dividend Advantage Fund Series F: 1 Year: 19.8%, 3 year: 11.7%, 5 year: 10.9%, Since Inception (June 19, 2015): 10.2%.

S&P500 Total Return Index: 1 Year: 27.2%, 3 year: 16.8%, 5 year: 17.1%, Since Inception (June 19, 2015): 15.9%.

²Actual investments, first purchased: TTEK 9/25/2020, CDW 7/29/2020 and MSI 1/28/2019.

All data is as of August 31, 2021 sourced from Morningstar Direct, 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: September 15, 2021.