July 2023 | Caldwell U.S. Dividend Advantage Fund Commentary

July Recap:
For the month of July, the Caldwell U.S. Dividend Advantage Fund (“UDA” or “Fund”) gained 1.1% versus a gain of 2.7% for the S&P500 Total Return Index (“Index”)1. At the sector level, top performers were Energy, Communications Services, and Financials, whereas, Healthcare, Real Estate, and Consumer Staples were relative underperformers. The performance of the Index during July was broad-based, where each sector within the Index posted positive returns. This was unlike what had been the case during most of the first half of this year, where Technology related stocks generated most of the returns posted by the Index.

Top performers in July were Badger Meter (“BMI”, +11.0%), FedEx (“FDX”, +8.3%), and Comfort Systems USA (“FIX”, +5.4%). BMI rerated higher after delivering a strong quarter fuelled by robust demand and a growing average selling price. The bundling of its meters, radios, and software is also providing a lift to its margins. Their backlog grew modestly driven by the replacement of standard water meters with smart water meters as utility companies and industrial clients are increasingly interested in data collection and analytics to better manage critical resources. FDX continued to rerate higher after demonstrating good progress on its cost-cutting and restructuring plans in its earnings release in the prior month. The company has been able to maintain its operating margin despite the unfavourable demand backdrop. FIX continues to benefit from persistent demand to the point where the company turned down work in some instances due to capacity constraints. However, further capacity buildouts are underway. Its management also expects margins to continue trending slightly higher for the remainder of the year.

During the month of July, the Fund did not initiate any positions.

The Fund held a 4.5% 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 June 30, 2023:
Caldwell U.S. Dividend Advantage Fund (Series F): 1 Year: 7.7%, 3 year: 8.3%, 5 year: 8.1%, Since Inception (June 19, 2015): 8.2%.
S&P500 Total Return Index: 1 Year: 16.1%, 3 year: 13.1%, 5 year: 12.4%, Since Inception (June 19, 2015): 13.1%.

²Actual investments, first purchased: BMI 6/7/2023, FDX 2/9/2023, FIX 11/9/2022.
All data is as of July 31, 2023 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: August 15, 2023.