Tangerine Dividend Portfolio

Yield seekers, dividend investors, and retirees are always looking for cheap ways to generate diversified income. In today’s low interest rate world this is becoming increasingly difficult. Here is a summary, performance review, and analysis of one option available to investors: The Tangerine Dividend Portfolio. 

Strategy:

According to Tangerine’s prospectus, this fund aims to “provide capital appreciation and dividend income by investing in companies around the world that are expected to pay dividends.” To do this, the fund seeks to mirror the combination of three indexes: the MSCI Canada High Dividend Yield Index, the MSCI USA High Dividend Yield Index, and the MSCI EAFE High Dividend Yield Index. These indexes track some of the most stable and important capital markets in the world making them good locations with which to hunt for yield.

Allocation & Investment Mix:

The Tangerine Dividend Portfolio is 99.7% invested in Canadian, American, and International Equities as of August 31, 2019. Canada makes up 50.8% of the allocation while America accounts for 24.5% and International accounts for 24.4%.

Tangerine Dividend Portfolio
Source: Fund Facts via Tangerine, October 30, 2019 PDF.

The fund is well diversified with over 250 investments and no single stock accounting for more than 5% of the portfolio. As of mid-2019, its biggest holdings were Inter Pipeline, Fortis, Hydro One, TC Energy, and BCE. As of early 2020, the fund’s turnover was calculated at 23%.

Performance & Returns:

As of August 2019, the annual compounded return was 6.4%. According to Morningstar the trailing-twelve-month yield is currently 2.90%. Morningstar also provides good (and up to date) data on how the fund has performed since inception, on an annual basis, and versus benchmarks. Here is a table:

Tangerine Dividend Portfolio returns
Source: Morningstar

The fund had an excellent 2019 with a near 20% return, but lost 6.64% in 2018. Over time, the fund has roughly matched the index which is a good sign. This means the fund is doing what it is intended to do.

Fees:

For a mutual fund, the fees are fairly low. The Management Expense Ratio (MER) is 1.07% and the Trading Expense Ratio is (TER) is 0.03% for a total Fund Expense of 1.10%. Investors may generate other fees if the fund is switched or sold. According to Tangerine these fees are $125.00.  While these fees are not as low as some ETFs out there, they appear low versus industry averages. This low fee structure should not come as a surprise to those who bank with Tangerine or use other Tangerine products. The bank – fortunately given it was acquired by Scotia in 2012 – remains true to its low-cost roots.

Other Fund Facts:

The Tangerine Dividend Fund was launched in late 2016 so one knock against it is that it hasn’t been around that long. Fortunately, the indexes it tracks have been around much longer.

Tangerine Investment Management Inc. has related the fund’s volatility and risk as medium. The prospectus lists many risks including equity / market risk, exchange traded fund risk, foreign investment risk, and more. Plus, the prospectus includes the typical spiel around how past returns are not indicative of future performance. This is pretty standard language for a fund sold in Canada.

Distributions and dividends are paid out to investors annually in December of each year. While many funds pay out annually, this may be a problem for some investors who are used to investing in companies or securities that pay out each quarter or even each month. According to the prospectus:

“All distributions on units held in Registered Plans will be automatically reinvested in additional units of this Fund. All distributions on units held outside a Registered Plan will also be automatically reinvested in additional units of this Fund, unless you tell your dealer you want to receive them in cash.”

Investors wishing to receive cash instead of buying more units may want to keep this in mind when buying into this fund.

As for minimum investment thresholds, the fund doesn’t have a minimum. This is a nice feature for those who want to test the water and buy a little before committing more money. The lack of a minimum investment also makes it accessible to small investors or investors who are just starting out and don’t have much to invest.

Conclusion:

In today’s low interest rate world, many dividend investors, yield seekers, and retirees are looking for cheap ways to generate diversified income. The Tangerine Dividend Portfolio is relatively cheap, diversified, and provides a decent yield which is paid out annually. Since its inception in late 2016, it has generated respectable returns which have roughly matched its benchmarks. The prospectus provided by Tangerine clearly spells out the risks associated with the fund and gives a decent overview of how the fund works.

Disclaimer:

This is not an endorsement and is intended for informational purposes only. Smart Dividend Stocks has not invested in this fund.  I have not invested personally in this fund. I do, however, bank with Tangerine. If you’re interested in opening a Tangerine account use my Orange Key: 39766591S1, deposit a minimum balance of $250, and receive a $50 bonus. Sign up here.

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