May 2024 | Caldwell U.S. Dividend Advantage Fund Commentary

Month End Recap:

For the month of May, the Caldwell U.S. Dividend Advantage Fund (“UDA” or “Fund”) gained 2.6% versus a gain of 4.1% for the S&P 500 Total Return Index (“Index”)1. From a sector standpoint, Information Technology, Utilities, and Communication Services were relative outperformers, whereas, Energy, Consumer Discretionary, and Industrials underperformed.

Top performers in the month of May were FTAI Aviation (“FTAI”), Costco Wholesale (“COST”), and Quanta Services (“PWR”). FTAI continued to rerate higher as the company is benefitting from a robust demand backdrop due to Boeing facing production challenges, which are leading to higher lease rates. COST rerated higher as the company has been experiencing strong traffic as well as robust membership renewal rates. PWR performed well as the company’s management provided constructive commentary regarding the data center theme and the expected load growth that is associated with it. The rapidly increasing load growth projections by utility companies should lead to further backlog additions for the company.

During the month of May, the Fund initiated positions in Vertiv Holdings (“VRT”) and Crane (“CR”). VRT designs, manufactures, and services critical digital infrastructure technology that powers, cools, deploys, secures, and maintains electronics that process, store, and transmit data. The company possesses a strong competitive position in data center power and thermal management, which should lead to wallet share growth as the industry’s compute density continues to increase. CR is a diversified manufacturer of highly engineered industrial products, primarily serving aerospace, defense, chemical, pharmaceutical, general industrial, water, and energy markets. The company is poised to achieve margin improvement stemming from continued pricing strength and recovering volumes as production rates at Boeing and Airbus are rising. Additionally, its European industrial end markets are also expected to improve.

The Fund held a 6.8% 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 May 31, 2024:
Caldwell U.S. Dividend Advantage Fund (Series F): 1 Year: 23.1%, 3 year: 10.5%, 5 year: 11.1%, Since Inception (June 19, 2015): 9.2%.
S&P500 Total Return Index: 1 Year: 28.5%, 3 year: 14.1%, 5 year: 16.0%, Since Inception (June 19, 2015): 14.2%.

2Actual investments, first purchased: FTAI 12/5/2023, COST 7/22/2022, PWR 5/31/2022.

All data is as of May 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: June 13, 2024.

Want to hear something good?Sign up for updates