2 March 2013
Today Dividend Growth Split Corp. took my attention (partially because I help a small Canadian investor). It is an open-ended equity mutual fund (MF) launched and managed by Brompton Funds Management Limited (www.bromptongroup.com/funds/fund/dgs/overview) that has Class A and Preferred shares.
This MF brochure says:
"• Blue-chip portfolio of Canadian equities with among the highest dividend growth rates of those companies included in the S&P/TSX Composite Index.
• Potential for capital appreciation for Class A shares /DGS.TO/ due to leveraged exposure to Dividend Growth portfolio
•Selective use of covered call writing to enhance returns"
Indeed many Canadian firms have progressive dividend policy and included in CCC list. Hence I expect that the fund will pay dividends that increases in time (at least for Class A shares).
My expectation is wrong - the fund pays constant 10 cents/month dividends for DGS.TO shares from January 2008 (when it was established) till today.
"To provide holders of Preferred shares with fixed cumulative preferential quarterly cash distributions of $0.13125 per share and to return the original issue price to Preferred Shareholders on November 30, 2014, subject to extension of the term for periods of up to five years as determined by the board of directors.
To provide holders of Class A shares with regular monthly cash distributions targeted to be $0.10 per share (provided the net asset value per unit, each unit consists of one Class A and one Preferred share, is in excess of $15.00) and the opportunity for growth in net asset value per Class A share."
This fund advertise "Low cost: Management fee of 0.60% of net assets per annum" but in reality "Management expense ratio of 1.09% (excluding cost of leverage provided by the Preferred shares) for the six months ended June 30, 2012." Well, IMO this is another example of Wall Street's Tithe (seekingalpha.com/instablog/725729-sds-se...) and I cannot say that 0.6% is low (some S&P500 funds charge 10X less).
I wrote already about dividend MFs and ETFs (seekingalpha.com/instablog/725729-sds-se...) and, unfortunately, Dividend Growth Split Corp. cannot also be qualified as a Dividend Growth fund.
I doubt that DGI and open-end MF are compatible.