The Dividend Builder Fund has returned 14.79% YTD versus 16.53% for the MSCI World Index. The fund seeks a concentrated portfolio of high quality companies at an attractive price that pays a moderate and growing dividend. We are not looking for the highest possible yield, but rather a sustainable dividend that can grow into the future.
The Dividend Builder Fund typically has 35 equally weighted positions. We start with 16,000 globally listed companies and look for 10 years of Cash Flow Return on Investment (CFROI) greater than 10%. We focus on Debt-to-Equity ratios less than 1.0 and market caps greater than $1 billion. At this point, our investment universe is narrowed down to 600 companies. We then ignore yield and focus on quality, stability, and profitability.
Our top five performing stocks for Q3 were Anta Sports, AbbVie, Royal Dutch Shell, Schneider Electric, and Novo Nordisk. Our bottom five performing stocks were Teva Pharmaceutical, Mattel, WPP, Sonic Healthcare, and Japan Tobacco.
Changes made in the quarter consisted of buying British American Tobacco and Hengan, while selling Teva Pharmaceutical and Mattel. British American Tobacco is a high-quality company who recently acquired Reynolds American Tobacco, giving them a global footprint. Hengan is one of the largest producers of sanitary supplies for China and has been growing their dividend while reinvesting.
Our fund tends to lean more Value over Growth, which explains part of the underperformance so far. Our fund tends to do quite well when markets are under pressure or in negative territory.