October 2021 | Caldwell U.S. Dividend Advantage Fund Commentary

In October, the Caldwell U.S. Dividend Advantage Fund (“UDA”) gained 4.8%1 versus 4.7% for the S&P 500 Total Return Index (“Index”). Top performing sectors in the Index were Consumer Discretionary, led by sector heavyweights and a more than 40% increase in Tesla’s share price, and Energy, driven by rising oil prices and a strong return of domestic air travel. Additionally, U.S. energy producers are exercising constraint in adding back capacity which should support higher energy prices. The Information Technology sector was also a strong performer driven by mega cap tech and semiconductor names.

Top contributors to UDA performance in October were Tetra Tech (“TTEK” +15.1%), UnitedHealth Group (“UNH” +15.3%) and Intercontinental Exchange (“ICE” +18%)2.

TTEK moved higher as Congress gets ever closer to finalizing a large scale infrastructure deal. The company also continues to execute on its M&A strategy, adding an asset to its higher-margin analytics franchise in October. After beating third quarter expectations, UNH raised its full year guidance and sounded confident in its ability to appropriately price for potentially higher costs in its insurance segment. The OptumCare business is also seeing strong growth in revenue per customer as more care providers transition to a fully value-based care arrangement. Lastly, ICE also posted a strong quarter led by its exchange and mortgage franchises. The exchange side benefited from higher trading volume in interest rate and energy futures while the mortgage side is seeing strong new customer wins and cross sell activity that more than offset a decline in origination volume across the platform.

Four stocks were added to the portfolio in October: Murphy USA (“MUSA”), Coterra Energy (“CTRA”), Devon Energy (“DVN”) and Evercore (“EVR”).

Murphy markets refined fuel products to wholesale customers and to consumers through a network of retail stores. Extensive remodeling efforts are expected to drive organic growth while a recent acquisition is expected to improve the merchandise mix which should drive margin expansion over time. Coterra’s unhedged strategy should benefit from higher oil prices while a renewed focus on return of capital creates the possibility of accelerated dividend growth going forward. Devon similarly benefits from higher oil prices and the recent acquisition of WPX bolsters the company’s U.S.-focused strategy following previous divestitures of non-core international assets. Lastly, Evercore benefits from a robust M&A market and is adding senior director talent to broaden capabilities in areas such as Fintech, Biotech and Cleantech.

Despite ongoing supply chain issues and other macro related challenges, we believe the UDA, with its unique momentum-driven investment approach and focus on well-managed, dividend growth companies, is well positioned to provide strong performance in this market environment. We expect that dividend growth investing, which has been foundational to the Fund’s investment approach, will continue to provide a means of generating attractive risk adjusted returns for our investors over the long-term.

1Standard performance as at October 31, 2021:

Caldwell U.S. Dividend Advantage Fund Series F: 1 Year: 23.94%, 3 year: 14.65%, 5 year: 11.57%, Since Inception (June 19, 2015): 10.12%.

S&P500 Total Return Index: 1 Year: 32.86%, 3 year: 19.16%, 5 year: 17.08%, Since Inception (June 19, 2015): 15.42%.

2Actual investments, first purchased: ICE 9/25/2020, TTEK 9/25/2020 and UNH 10/23/2018.

All data is as of October 31, 2021 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: November 11, 2021.

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