Month End Recap:
For the month of January, the Caldwell U.S. Dividend Advantage Fund (UDA or Fund) gained 1.9% versus a gain of 3.5% for the S&P 500 Total Return Index (Index). From a sector standpoint, Communication Services, Healthcare, and Financials were relative outperformers, whereas Information Technology, Real Estate, and Consumer Staples underperformed.
Top performers in the month of January were Meta Platforms (META), Interactive Brokers Group (IBKR), and KKR & Co. (KKR). META continued to rerate higher reinforced by its robust quarterly earnings, which demonstrated that Artificial Intelligence (AI) supported ad targeting is driving improved return on investment for advertisers, allowing for increases in ad pricing by the company. The improving profitability metrics also led investors to get more comfortable with the company’s enormous capital expenditures in aimed at expanding its AI infrastructure. IBKR delivered robust earnings as a result of strong client growth as well as client account balance growth, driven by high investor participation in the rising markets and optimism around the market environment under the Trump administration. KKR’s momentum picked up again as its last earnings demonstrated strength, driven by strong performance across multiple funds, including newer areas such as infrastructure, and a cyclical rebound in core private equity and real estate. Lower interest rates and expectations of a less restrictive regulatory environment under the Trump administration should support the recovery of cyclically depressed markets. To that end, management noted a robust mergers and acquisitions (M&A) pipeline, reflecting increased confidence among companies in pursuing M&A activity.
During the month of January, the Fund initiated positions in Carpenter Technology (CRS), Primoris Services (PRIM), and Corning (GLW).
CRS manufactures and supplies cast, wrought, and powder metal stainless steels, along with specialty alloys, titanium alloys, and tool steels. The company benefits from high barriers to entry due to significant capital investment requirements, lengthy permitting processes, and stringent industry qualification standards. Long lead times, a robust and diversified backlog, and the current strong customer demand for faster deliveries support its pricing power and should reduce volatility in quarterly results over the near to medium term.
PRIM is a diversified holding company specializing in construction, fabrication, maintenance, replacement, and engineering services. The company operates across three key segments: Utilities, Energy & Renewables, and Pipeline. The company is well-positioned to capitalize on a large and high-growth Total Addressable Market (TAM), driven by accelerating grid and renewable capital expenditures over the next five years. By prioritizing high-margin opportunities in power delivery and renewable Engineering, Procurement, and Construction (EPC), it stands to benefit from industry tailwinds and increasing infrastructure investment.
GLW produces a range of glass-based products, including glass substrates for liquid crystal display (LCD) panels, optical fiber and cable for telecommunications, ceramic substrates and filters for automotive emission systems, and various glass and plastic products for life science applications. It is well-positioned to benefit from the accelerating demand for AI infrastructure. Announcements like the Stargate project highlight growing industry needs, reinforcing the case for the company to generate an additional $3 billion in revenue by the end of 2026 – already tracking ahead of expectations. With existing capacity in place to support this growth, much of the incremental revenue is expected to flow directly to the bottom line. However, despite these strong tailwinds, the market has yet to fully reflect this upside in its valuation.
The Fund held a 25.1% 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 January 31, 2025:
Caldwell U.S. Dividend Advantage Fund (Series F): 1 Year: 28.8%, 3 year: 11.8%, 5 year: 10.6%, Since Inception (June 19, 2015): 9.7%.
S&P500 Total Return Index: 1 Year: 37.0%, 3 year: 16.9%, 5 year: 17.3%, Since Inception (June 19, 2015): 15.5%.
2Actual investments, first purchased: META 10/17/2024, IBKR 9/14/2023, KKR 9/19/2024.
All data is as of January 31, 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: February 25, 2025.