Month End Recap:
For the month of February, the Caldwell U.S. Dividend Advantage Fund (UDA or Fund) declined -5.1% versus a decline of -1.8% for the S&P 500 Total Return Index (Index). From a sector standpoint, Consumer Staples, Real Estate, and Energy were relative outperformers, whereas Consumer Discretionary, Communication Services, and Industrials underperformed.
Top performers in the month of February were Costco Wholesale (COST), Eli Lilly and Co. (LLY), and Carpenter Technology (CRS). COST rerated higher as investors expected its sales momentum to continue, outpacing its peers. Additionally, amid accelerating inflation and tariff risks, the company’s superior value proposition and flexible product mix should enable it to capture additional market share and effectively manage margins. LLY continued to demonstrate robust sales momentum from its antidiabetic medication, Mounjaro, as well as its recently launched obesity medication, Zepbound. With the company’s manufacturing capacity expanding rapidly, it is well positioned to continue driving growth. CRS rerated higher as the company provided a robust outlook at its investor day, with the management raising its operating income guidance meaningfully.
During the month of February, the Fund initiated positions in JPMorgan Chase & Co. (JPM), Eli Lilly and Co. (LLY), Watsco (WSO), Brown & Brown (BRO), Walmart (WMT), Howmet Aerospace (HWM), Group 1 Automotive (GPI), and InterDigital (IDCC).
JPM is one of the world’s largest diversified banking institutions, with a top-tier global corporate and investment banking operation. It is also the second-largest mortgage originator in the U.S. The bank continues to exceed its earnings expectations, reinforcing investor confidence in its position as the premier U.S. banking franchise with comprehensive strengths across consumer, commercial, and institutional banking, as well as asset management.
LLY is involved in the development, manufacturing, and sale of pharmaceutical products. Its newer product portfolio is showing strong prospects for driving growth, resulting in its earnings per share growth estimates to compare favourably versus its peers.
WSO is a leading distributor of air conditioning, heating, and refrigeration equipment and related parts, serving both residential and commercial customers with a wide range of systems and specialized components. The company is driving growth through unit growth and customer acquisition, aided by its efforts over the last two years to improve its technology stack to target small and mid-sized customers who offer the greatest opportunity for share gains.
BRO is a leading insurance broker specializing in the commercial middle market space. It also acts as a managing general agent to insurers that outsource their underwriting function and provides wholesale services to smaller brokers with limited marketing and placement capabilities. The rising re-insurance rates suggest continued robust insurance pricing and BRO, being a broker, benefits from higher insurance pricing without incurring the underwriting risks.
WMT is the largest retailer in the world with over $680 billion in revenue across 10,771 stores and clubs operating in 19 countries as well as their eCommerce websites. It is also the largest non-government employer in the world, with over 2.1 million associates worldwide and 1.6 million in the U.S. The company’s price leadership positions it well to acquire incremental market share with low-income consumers, given the slowing economic conditions.
HWM provides advanced engineered solutions across the aerospace and transportation sectors. Its product suite includes precision jet engine components, aerospace fastening systems, and titanium structural parts — ensuring mission-critical performance and efficiency in aerospace and defence applications. The company is poised to capitalize on high demand, driving margin expansion and revenue growth. Demand for turbine blades is particularly strong, fueled by the replacement needs of aging commercial aircraft, geopolitical tensions spurring military aircraft production, and the growth of data centers requiring efficient power generation and cooling for Artificial Intelligence (AI). As the premier global supplier of turbine blades, its management expects strong future growth in both new components and aftermarket spare parts.
GPI is a diversified automotive retailer that sells new and used cars and light trucks, arranges vehicle financing, offers service contracts, and provides maintenance, repair services, and parts, operating in the U.S. and the U.K. The rebranding of its non-luxury banners to the unified “Group 1” name is expected to streamline operations and unlock cost synergies in the near term. This, combined with strategic investments in premium dealerships and proactive mergers and acquisitions activity, reinforces a positive outlook for the business.
IDCC is a global Research and Development (R&D) company specializing in wireless, video, AI, and related technologies, with a focus on designing innovative communications and entertainment products and services. Increased focus on improving the commercial viability of R&D efforts should increase efficiency. Furthermore, no incremental R&D is necessary for the company to achieve its 2023 revenue target, which provides the company with a strong opportunity for additional operating leverage over time.
The Fund held a 21.9% 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 February 28, 2025:
Caldwell U.S. Dividend Advantage Fund (Series F): 1 Year: 9.0%, 3 year: 10.4%, 5 year: 11.1%, Since Inception (June 19, 2015): 9.1%.
S&P500 Total Return Index: 1 Year: 25.8%, 3 year: 17.4%, 5 year: 18.5%, Since Inception (June 19, 2015): 15.2%.
2Actual investments, first purchased: COST 7/22/2022, LLY 9/14/2023, CRS 1/17/2025.
All data is as of February 28, 2025 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: March 24, 2025.