Month End Recap:
For the month of July, the Caldwell U.S. Dividend Advantage Fund (“UDA” or “Fund”) gained +0.6%, versus a gain of +2.2% for the S&P 500 Total Return Index (“Index”). From a sector standpoint, Real Estate, Utilities, and Financials were relative outperformers, whereas, Communication Services, Information Technology, and Consumer Discretionary underperformed.
Top performers in the month of July were PulteGroup (“PHM”), Ares Management (“ARES”), FTAI Aviation (“FTAI”). PHM reported a robust quarter, with earnings per share growing by 19%, driven by increases in closings, average sales prices, and gross margins. The company’s strong cash flows have allowed it to reinvest in growth while returning capital to shareholders, and its ability to navigate the current housing market’s challenges highlights its operational efficiency. ARES also delivered standout performance, achieving its highest gross fundraising and second-highest deployment levels in history. The firm raised $26 billion in capital, reflecting the growing interest in its private market solutions, and remains well-positioned with over $120 billion in available capital to capitalize on an improving transaction environment. FTAI continues its upward trajectory, with a 30% increase in its adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) in the recent quarter, bolstered by strong demand in its leasing and aerospace products segments. The company’s ability to control costs and optimize margins, along with raising its EBITDA estimates, has driven positive sentiment among investors, contributing to the stock’s continued strength.
During the month of July, the Fund initiated positions in Qualcomm (“QCOM”) and Carrier (“CARR”). QCOM is a global leader in mobile device technology, supplying chipsets used in smartphones and tablets. The company also generates a significant portion of its revenue through licensing its extensive patent portfolio, which includes key technologies essential for 5G communication. Beyond mobile, it has diversified into areas such as automotive, the Internet of Things, and radio frequency front-end products, further solidifying its influence in the wireless industry. Edge AI is driving a higher average selling price mix and the company is winning market share. Furthermore, its growing design pipeline in the automotive sector enhances its medium to long-term revenue prospects. CARR provides comprehensive building and cold chain solutions, specializing in HVAC (Heating, Ventilating, and Air Conditioning), refrigeration, fire, security, and building automation technologies. The company is benefiting from secular demand trends, with higher efficiency regulatory requirements driving a more profitable sales mix. It is also poised to capitalize on a cyclical upturn, as destocking in the North American residential market is largely complete. Additionally, strong demand in the North American commercial market, fueled by federal stimulus programs and the growth of data centers, further supports CARR’s growth prospects.
The Fund held an 11.9% 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 July 31, 2024:
Caldwell U.S. Dividend Advantage Fund (Series F): 1 Year: 21.7%, 3 year: 8.9%, 5 year: 16.2%, Since Inception (June 19, 2015): 9.3%.
S&P500 Total Return Index: 1 Year: 28.2%, 3 year: 13.4%, 5 year: 10.6%, Since Inception (June 19, 2015): 14.6%.
2Actual investments, first purchased: PHM 2/2/2023, ARES 9/14/2023, FTAI 12/5/2023.
All data is as of July 31, 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: August 15, 2024.