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May 17, 2023

Watch now: Alex Sasso webinar replay – NCM Income Growth Class

Vice President, Regional Sales, Daniel MacFarlane, sat down with Alex to discuss his market outlook, a key theme that could trigger explosive growth, why he focuses on dividends and how he has managed to outperform since 2006.


In which Canadian sectors do you see opportunities? Do you believe Canadian companies are positioned to remain competitive globally?
Alex explains how the theme of global warming could trigger explosive growth in some sectors.
Why should investors make dividends part of their investment strategy?
23:20 Alex explains why he has a much bigger dividend universe than most other mutual funds.
What's your outlook for the remainder of the year and into 2024?
NCM Income Growth Class is first percentile over three and 15 years and first quartile in every period over 15 years. How have you done it?
How does your fund fit into an investor portfolio?


Hello and welcome, everyone, to our ongoing NCM Dividend Season webinars. Today is Wednesday, May the 17th, 2023. My name is Daniel MacFarlane and I am Vice President, Regional Sales covering the GTA region. Last month we talked about global dividend investing and today we're going to discuss dividend investing here at home in Canada.

I'm joined with Alex Sasso, our CEO and portfolio manager for the Income Growth Class fund. Alex has managed this fund since its inception over 17 years ago and with solid performance over that long tenure, Alex continues to prove that he's an expert on investing in Canadian dividend paying companies.

So let's begin with continuing inflation, volatility and recession fears on everyone's minds. I believe that today's webinar is certainly timely and increasingly important as investing more domestically here at home looks more and more attractive.

So to get things started, Alex, let's talk about Canadian markets. What's been happening here relative to outside our borders and what's your thoughts on the Canadian sectors and areas that you see opportunities? And also, do you believe Canadian companies are positioned to remain competitive in the global landscape?

That’s a few questions there, Dan! Luckily I’ve got lots of slides. But first, thanks to everyone for attending. I'm truly flattered.

So let's talk about the back half of that question first and then we'll cycle to the first half of that question because I think Canadian companies look good relative to the rest of the world and I think it's under-appreciated by Canadian investors.

First, Canada is, as everybody knows on this call, Canada is self-sufficient in an abundance of high quality and low cost resources that are the feedstock for most goods that we manufacture in this country and most goods that are manufactured in North America.

Take, for example, natural gas, and I'll use this as the first example, but Canadian natural gas breakeven costs are amongst the lowest of the top ten major national gas producing countries around the world, which means that other countries take, for example, Japan, that buys gas at $10 and MMBtu are disadvantaged by a factor of 3 to 5 times.

And of course, natural gas is a big feedstock cost, and natural gas is not only used to heat, to convert to energy, to cook with, it's also one of those building block products, the feedstock products. So for example, for fertilizers. And as a result, here in Canada, we have some of the lowest cost fertilizer producers in the world.

It's a feedstock for electricity. It's a feedstock for things like plastics, chemicals, glass paper and so many other industries. And it means that all of these companies can have a significant advantage relative to their global competitors. Now, that's one product. Think of oil, another major building block in the manufacturing process. We are the fifth largest producer in the world.

Now think of copper, think of other metals, think of agriculture. And, you know, energy security, metal security and agriculture security are obviously much more a topic du jour today given what's happened in Europe and Asia over the past past year. Now, with regards to electricity, most of ours here in Canada is made with renewable hydro power. That's low cost, with low cost nuclear and with low cost natural gas.

So you take those three inputs or sources and you have some of the least expensive electricity in the world, which is to different degrees, a cost for almost every business on the planet. Again, another advantage for Canadians and of course this helps with profits and profits lead to taxes. And as many people may know, at 26.2% combined, federal provincial statutory corporate tax income tax rates, it's the lowest or one of the lowest in the G7.

And you know, it's interesting, according to the World Bank, Canada is the easiest place to do business. It's also the easiest place to start a business in the G20. And foreign investors agree because Canada has the second largest foreign direct investment to GDP ratio amongst the G20, and that's a U.N. stat.

You know, we've got a great balance sheet. We've got the lowest net debt to GDP in the G7, and we've had it for the last 15 years. And that's according to the IMF. And obviously Canadian banks, as we all know, we're amongst the world's safest and most dependable banks. All great reasons why you want to do business in Canada.

We’ve also got a really educated talent pool as well. Sixty percent of our population age 25 to 65 has a tertiary level of education and we've got some of the highest living standards in the world.

And then in terms of proximity, obviously we got the U.S. just south of us, the world's biggest market. We've got trade deals, we've got the USMCA, we've got CEDA with Europe. People here respect the rule of law.

And then the final thing I'll say on this topic, Dan, is that Canada is the most democratic and peaceful country in the G20, and I'm guessing that may change if Canada doesn’t win the Stanley Cup soon. So it's been 30 it's been 30 years. Dan, I think the last team to win the Stanley Cup was the Montreal Canadiens back in, I think it was 1993. They were playing the L.A. Kings, Wayne Gretzky and the L.A. Kings.

But the other thing that we need to think about when we think of Canada from my perspective, is that as investors, we underprice companies. And I don't mean that of the mega-caps. Those are efficiently priced. Those are known by the international investment community and in my opinion, they're properly priced. But what I'm talking about is small caps and mid-caps, great, great companies, under-followed and under-loved relative to what happens in the U.S. And as a result, these companies keep getting picked off by higher multiple U.S. and global competitors because those competitors know the value of these assets.

This is a company we used to own. It's a company called IPG. They were taken out at an 82% premium, and that's because somebody south of the border knew the value of these assets.

And, you know, we all know of the rail take overs, we all know Rogers for Shaw, but you know, far away from the high profile mergers are, you know, the Apollos buying Great Canadian Gaming , West Fraser bought Norbord, Agnico bought TMAC, Telus bought LifeWorks, which was the old Morneau Shepell.

And you know, I can only really scratch the surface here. We've had our share of takeouts and they're always great to get them. But I'm expecting this trend to continue for some time.

And Dan, I think you also asked about sectors, so I'll spend a little bit of time on this, but let me just expand that to a theme because it'll impact a few different sectors and it might be more impactful for the audience.

And that theme is, is global warming. So this is something I've been spending some time on and as many of the people on the call will know, Canada, along with a majority of the countries around the world, signed the Paris Accord. And what was the Paris Accord? The Paris Accord is designed to limit global warming to one and a half degrees by 2030, reduce emissions by 45% by 2030. And the eventual goal is we want to get to net zero by 2050.

This is going to be a pretty big transition. And that transition, that energy transition starts and ends with metal companies. And if you can focus on the center blue, the navy blue lines that are all above the axis right there, what we're showing you here is some bulk metals that we need massive investments in in order to meet the supply shortfall. So this is the estimated supply shortfall to hit the Paris Accords targets by 2030.

So I'm kind of starting with the conclusion here, but bear with me as I take you through this. And the bottom line is the world needs a massive expansion in metals output. And the problem, as I see it today as a society, we have I call it the energy trilemma and the energy trilemma is we need we need energy security, we need energy affordability and we need energy sustainability.

How are we going to do this? And obviously it's never been more important today than after seeing Russia's expansionist goals, and all of these kind of trump the carbonless energy goals that we have. And so really this chart is showing you is the gap that we need to fill by 2030.

And remember, 2030 is the interim goal. It's not the final goal. The final goal is we want to be carbonless by 2050. Now, Dan, the markets today amongst the big metals is fairly well balanced, admittedly, and the supply roughly matches demand for many of these metals in particular. In fact, I'll focus my comments on copper because it's the one I'm most excited about from a mid to long term point of view.

And just so people in the audience know, I've read stats that say that we will consume more copper in the next 28 years if countries really make an effort to hit these Paris Accord climate change goals, we will consume more copper in the next 28 years than we've consumed cumulatively since 1900.

And there's a major energy consulting company called Rystad. And they're saying that if we do hit these goals by 2030, we've got a massive shortfall coming in copper of almost 6 million tonnes. And to put that 6 million tonnes into perspective, that is roughly the size of Chile's total output. And so everybody on the call should know that Chile is the world's largest producer of copper. They produce 27% of the world's supply. Peru, their neighbor produces 10%. The two of them combined produce 37%. And let's not forget, Russia is a major producer and there's another 4%.

So you can see it's going to be difficult meeting these 2030 goals. But why is this growth happening? It's because copper is a crucial input into renewable infrastructure. And to give you a sense, it takes two and a half times the amount of copper to produce a wind turbine than it does a natural gas plant. An offshore wind turbine takes seven and a half times the amount of copper. Electric vehicles, which we're going to have to transition to to hit some of these climate change goals, use almost four times more copper than in ICU or internal combustion engines.

So we've got to get our act together and the world's got to get their act together and find more deposits. Now let's just pretend that we had a deposit. So how long does it take for the world to take a deposit and to build a mine?

So the third bar down is copper. And so feasibility studies are going to take you five years, four years for construction and three years for ramp up. And if you want a mine in a safe jurisdiction like Detroit in the US, it's going to take a lot longer. There's ten years for environmental permitting and other permits, water permits, etc. before you can even start construction. So it's going to take 20 years before you produce a dollar of revenues.

So the bottom line is we don't have enough copper to meet the anticipated demand coming from this energy transition in the world and of course, the world's commitments to the Paris Accord, even the 2030 interim target is going to be really tough to achieve.

And this basically means copper prices need to go a lot higher to make the marginal deposits in the world economic. Now, you might be saying to me, well, why don't these mines just increase grade or why don't they just expand some of the tertiary deposits that are around the main domain pit? Well, I've looked at those and they're basically a rounding error relative to what's needed.

So the good news in all of this is that there's going to be a whole heck of a lot of industries that are going to make a whole heck of a lot of money when this mining CapEx boom happens and we're going to take advantage of it.

Operator, If you can put up slide number seven, just to give you a sense of the scale of this, and these are Wood Mackenzie numbers. They're probably the preeminent consultant in the metals world, but that bottom line there, that's the copper spend that the world needs to do. Now, not all metals are in the same fortunate position. I picked on copper because I know the supply/demand fundamentals, they go from balanced to almost impossible because of the expected growth.

Operator, do me a favour, throw up slide number eight, and this is just a nice summary of what we've just talked about. It's a chart that I found at BMO that helps kind of summarize your questions. On the right hand side. You've got the metals that you want to concentrate on. In the left hand side, you got metals that are in balanced or overproduced.

Now, again, I want to emphasize that today copper looks balanced and it looks balanced for the next couple of years, even though stockpiles today are currently very low and my challenge is trying to figure out when the market is going to start to discount this information.

Perfect. And thank you for that. It sounds like there's a lot of good things going in Canada's favour right now, as long as we can still keep our hands possibly on that Stanley Cup.

So the next question that we have here is dividend paying companies play a vital role in our economy. Can you explain to the group why dividends are so important to you and why investors should seriously look to ensure they're a part of their investment strategy?

Okay, that's a much easier question. So dividends are something I've been preaching for a long time, so a lot of this is kind of second nature to me. But to start, look, let me just name off a couple of things.

One, dividends reinforce. I always see dividends reinforce a buy and hold strategy. And that's key. And it does it because it pays. You get paid. So you get you get paid by implementing a buy and hold strategy.

People believe that they can outsmart short term market gyrations. And I've been doing this for 25 years and I've worked with some of the best minds in the business. And guess what? Not one of them has done it with any kind of consistency. So I would encourage you, when it comes to dividends and dividend payers, that core portion of your portfolio, buy and hold with high quality dividend companies are the best strategy.

Number two, dividends are really easy to understand and only good quality companies pay and grow dividends. Actually, let me take that back. There are companies to pay dividends that are not good quality companies, but there's only good quality companies that grow their dividend. And the reason is, is I haven't seen too many companies that are growing their dividends and, all the while, management and the board is noticing a deterioration in the business. So focus in on dividend growers.

Number three, dividends pay you. We've already talked about this, but dividends pay you enough said.

Number four, dividend growth fights inflation. It beats up inflation. And remember, the problem with fixed income securities is that that they are just that - they are fixed. Inflation beats them up over time and you lose purchasing power with fixed income securities. A stock on the other hand, that's growing its dividend improves your purchasing power.

I may have mentioned this on one of the past webcasts that I've been on, but there's some great stats to show for over 150 years, dividend growth has exceeded inflation, meaning that your purchasing power has improved. And I can’t understate how important that is because inflation is the destroyer of wealth. Dividends help you combat that. It's one of the only asset classes that can help you beat up on inflation.

Okay, So number five, and this one is important too, so in Canada, dividends from Canadian companies are tax advantaged. So like, let's take, for example, $1,000 in dividend income. Assuming that you're in the top tax bracket, you're going to pay $390 for that thousand dollars of earned dividend income in taxes. Now, if you had the same thousand dollars, but in interest income, it's going to cost you $530. So there's a material $140 of savings right there and, paying the government $530, you're keeping $470, you're giving the government more money of the money you earn, than you're keeping yourself with interest income.

So again, yeah, and I really haven't even touched on the best part yet and I've kind of lost track if I was at number five or number six, but number six dividends exhibit one of the best risk reward characteristics of any asset class. And the best way to show this, operator, if you can put up slide number nine, some of you that have seen some of my past webcasts will say, “Sasso, you showed this chart before!” It's just so impactful that I just can't help myself. We got to keep showing it.

So here you can see dividend growers and dividend payers outperform the TSX, significantly outperform dividend cutters, as you would expect, but also materially outperform the non-payers. So to the advisors out there for all of those names in your portfolio that's a non-dividend payer or maybe it's a dividend cutter, you need to take that into your calculus because you know, math tells you that the dividend growers are going to outperform over time.

So you really need to be opportunistic with those dividend cutters and most non payers. I'm not saying that there are not any good non dividend payers out there, there's lots of them. But again, portfolio management is all about probabilities and math and not only that, operator, if you can put up slide ten, they carry lower risk with them as well in terms of volatility. And you know, here we're showing the volatility of the dividend growers and the dividend payers relative to the other asset classes out there. So when I say better risk/reward, you're getting better reward and you're taking on less risk and that's a pretty good trade off for me.

So now the way the market measures volatility is with standard deviation. But another way to look at it is taking a look at the absolute dollar of dividends paid and the consistency of those payments over years and the trajectory of that line as well. Okay. So the red line here is the yield of the S&P TSX since 2000. And then the yield percentages on the right hand axis. Now, take a look at the yellow bars. These represent the total dividend dollars paid by TSX listed companies. And you notice how smooth that line is and the beautiful trajectory it's on.

Those dividends have survived the dot com bubble. They've survived the great financial crisis. They've survived a few recessions, a health pandemic where a big chunk of the population was working from home and a good chunk of the population didn't know if they would have jobs at at in the depths of March, April or May of 2000.

But if I could, if I can now focus your eyes over to the right hand side and notice the growth between 2019 of the yellow bars. Again, those are the dividend dollars paid in the current to the end of the year run rate. And we see that dividend growth at 33%, meaning that investors are now demanding higher capital allocation or better capital allocation policies from other companies.

And don't forget that a big percentage of these in fact, I would argue more companies that make up those yellow bars are small and midsize companies. It is not just your banks and it's not just your utilities.

And one more thing. I think it's important because what I've noticed is more and more companies are developing histories of consistent dividend increases. So one third of the TSX members today have a track record of consistently increasing their dividends over the last five years. One third. It's amazing. And to give you a sense of how good that is, Dan, two decades ago it was 10%. So Canadian companies are much more consistent today than they were a few decades ago.

And it's not just Canadian data. Bloomberg came out with a story saying that the aggregate paid by members of the S&P 500 had reached all time highs, and that is the dividends. And incidentally, this morning I read that Goldman Sachs said the buyback authorization in Q1 has hit a new record. So between your dividends and between your buybacks, investors have been getting a record amount of capital coming back to them.

Most of the money, the dividend focused money in Canada is managed by large cap dividend. An equity balanced fund manager sets most of the dividend money managed in this country. And what we're showing you here is that they're really confined to the 125 companies that have a market cap of $3 billion or more.

And we know that these fund managers typically have 100 names in their portfolios. So basically they own almost all of the dividend paying large cap companies out there. And their key consideration is whether they are overweight Royal Bank relative to their competitors or relative to the benchmark or underweighted. So they likely own index. They're going to perform like the index, they're going to underperform the index by the amount of their fees because their active share score is going to be really low.

We're different. We're definitely different. We have an additional 210 companies we can choose from and we run concentrated portfolios of the very best of the companies. We don't have to choose every single dividend payer out there.

Yeah, that's great info and lots of reasons to invest in dividends as well as, you know, a lot of opportunity that you just discussed there, which is great.

So the next question that we have for you, Alex, is as we know, the markets have certainly been volatile over the past couple of years with eight rate hikes in the past year and a half., Bank of Canada finally playing the pause on for now. So how are you seeing Canadian equities positioned and what's your outlook for the remainder of the year and into 2024?

Okay. So 2023 is kind of half-done, Dan, and so the back half is a bit of a random walk. We've got a lot of geopolitical noise happening and offset by better earnings, especially in Q1 so far. But remember, a stock price is the earnings of that company, present value back to today.

So operator, if you can put up Slide 13, and this is a little bit of a complicated slide and really what we're endeavoring to show you here is the evolution of expected earnings year over year by quarter. So this is a typical, this pattern where you see earnings come off over time. That is very typical. The market is used to it. It's nothing that scares the market. But if you take a look at the blue line, that is your 2023 Q1, so that's the quarter that we just finished, I literally just jumped off, I can't tell you how many dozen conference calls, but that blue line has a bit of an uptick to it right at the end, and that's because earnings came in quite a bit better than expected.

And then if you look at the kind of purple-ish line that kind of finishes with plus 7.3, that's kind of your Q4 2023. So the market is definitely expecting a back end loaded earnings growth period.

And this kind of coincides with expectations of a Fed Funds rate cut in the US. Now the market is expecting a rate cut. I'm not saying the Fed is communicating a rate cut. In fact, quite the opposite. As of today, the Fed is not expecting any rate cuts until 2024 and in 2024 where the Fed is expecting in their, SEP, their Summary of Economic Projections, they're expecting three rate cuts in 2024. So you can see that they're pushing for higher for longer, which is contrary to what the market is pricing in.

And this tug of war between the Fed and market expectations is going to have an impact on stock prices and in my opinion, is going to hurt the higher multiple stocks in the market disproportionately. They always get hurt more than your value stocks, for example, or some of your defensives, even though the defensives right now are positioned a bit more expensive than they typically are.

But my money is on Powell and I say this because he's a student, as is the Fed, they’re the student of the rampant inflation that we saw in the sixties and seventies. And he doesn't want to make the same mistakes. On five separate occasions back then, the Fed eased too soon, lost control of inflation and had to turn around and increase rates again.

And the Fed's consistent message over and over has been that they want a restrictive monetary policy with the Fed funds rate above the inflation rate. So they want the Fed funds rate above the inflation rate. And I think that's really critical. And they've communicated this. So inflation is going to be a key to getting interest rates down.

Now, the Fed wants growth, but they want below trend growth to make sure that they can slowly take that inflation headline number lower and lower. Now, let's spend a second talking about inflation, because to me, it's it's one of the most critical ingredients.

And as to whether or not 2023 and 2024 show positively, so there's three phases to inflation. There’s goods inflation, which peaked in 2022 and we spent some time talking about this. There’s services inflation, which peaked in early 2023. And we see that tapering off. But then there's labour inflation and that lags and the Fed wants to see a softer labour market. We have a very tight three and a half percent unemployment rate in the U.S. right now. The Fed wants to see that at 4.5% or 4.6% by Q4. So they need a restrictive monetary policy to make sure that that happens because labour inflation, wage inflation, whatever you want to call it, that's the worst kind of inflation. It is sticky and it is stubborn.

So the way that I see it is the Fed has really got three options. One you ease today to appease the market, be really good for the market and you try ensuring a soft landing, which by the way soft landings are very difficult to achieve. We've only had three true soft landings since the 1960s. But what'll happen in this scenario is the tight labour market will get tighter, wages will go higher in a period where companies have pricing power. So this is an instant replay of the 1970s, and I can assure you the Fed is not going to let this happen.

The second thing you can do is the opposite. You can get really tight, so you increase rates to seven, 8%-plus, you cause a severe recession, and think of what Volcker did in the seventies and eighties, and that's how we killed inflation. But inflation wasn't manageable back then. We still think inflation is manageable today. So you see increased rates significantly, but you kill employment, and that will do structural damage to the economy. So I don't think that's in the cards either.

So the third and the last is the policy I believe the policy that they're on. They're going to leave the terminal rate unchanged for 2023. They're going to ease in 2024, to engineer below trend growth. And I think that's what they're really trying to do and that this will let inflation slowly taper back to the 2% target. Now, remember, in the Fed SET, they're expecting 3% inflation for 2023 and they're not expecting 2% inflation until we hit 2025. So you can see wage inflation, how sticky it is and the impact that that has on and how difficult that makes their job.

So this is the Purchasing Managers index. It's one of my it's one of my favorites. And I wouldn't necessarily say it's a perfect leading indicator. In fact, it might not even be considered a leading indicator. It might be considered a coincidental indicator, but it's one of the best measures that we have on telling us how the economy is doing today.

So a reading below 50 shows contraction, a reading above 50 shows expansion, and that blue line that you guys are seeing, that's the number of countries that have expanding PMI, the number of economies that have expanding PMI. So only nine of 30 global economies today have a PMI above 50 so roughly the same amount as 2012. If you take your eyes to the left hand side there of the chart and I'm viewing this as a mild positive because the increase in the PMI to 49.6 that you see there on the right hand side is showing that the contraction in the economy is less bad and we tend to look at things in terms of rate of change, is the rate of change getting worse or is the rate of change slowing and in this case things are getting less bad.

So I think the Fed is doing a good job of navigating a tight policy and slowly reducing inflation without severely damaging the markets. And, you know, like, I think higher earnings that we showed in the previous chart later in the year plus some interest rate stimulus in 2024, that the market will start baking in early, is going to lead equity investors to wanting to position their portfolios for growth.

Perfect. All right. Thank you Alex and yeah so we do have a question that came in from the Q&A here, and they're asking about how you evaluate the companies that you deal with. I'm also going to tie it in for timing purposes here that when it comes to your performance, so you manage the NCM Income Growth Class fund, and it has a tremendous track record. For those of you on the call, on Morningstar, it's placed at first percentile for both three and 15 years in this category, as well as first quartile from one year all the way through to 15. So can you tell us, Alex, you know, what is it that you look for in the companies that you look to buy? And also, how have you been able to sustain such a high performance over such a long period of time?

So thanks for the kind words there, Dan, or whoever submitted the question. You know, it's really about discipline. Portfolio management is about discipline and portfolio management is about stacking probabilities in your favour and, you know, people may have heard me say this before, but I’ve got the benefit of having two great mathematicians in our Calgary office to help with the quant side of things, and we marry the quant and the fundamentals. And if you do that again, you're just stacking probabilities in your favour.

So, you know, maybe if the operator wants to throw up slide 16 I can talk about some of the stats. So maybe just doesn't explain how we manage money, but it'll explain the outcome of our management.

And so what we're showing you here is the Income Growth Fund relative to the TSX. And if you slide over a couple of columns, you see something called price earnings, and that's a measure of the valuation of our businesses in the fund. So you can see for every dollar of earnings, we pay $10.80 and for every dollar of earnings in amongst the TSX, you pay $14 if you're buying the TSX. So you can see that our companies are less expensive and materially less expensive than the market. And our price to cash flow, it's very similar to price earnings, but instead of using the bottom line earnings, we're using the cash flow that the business generates and again, our businesses are quite a bit less expensive.

Our return on equity, which is a measure of profitability, is roughly similar to the overall index. But take a look at earnings surprise and earnings momentum. Both of those are significantly better. So our average company is growing faster, much faster than the overall market, and yet we pay less for them. And that's kind of the holy grail of investing. You want you want rapidly growing companies, but you don't want to pay for them because eventually the market's going to catch on and you're going to get something called multiple expansion. So you're going to get your dividends, you're going to get your multiple expansion because you own better quality companies.

Now, if you go to free cash flow yield, this is one of the best predictors of future stock price movement. It is the cash flow that's in the company after the business pays for everything. So this is the money management sits around the table with the board and says, “How are we going to grow this business? Or are we going to repatriate more money back to the shareholders?” Higher free cash flow yield is obviously quite a bit better.

And then you can see our dividend yield is quite a bit better than the TSX and then our dividend growth. Importantly, our dividend growth is significantly better than the TSX as well.

Now what I will tell you, Dan, is metrics like this are, you know, for one individual stock aren't necessarily a slam dunk, but putting a bunch of these in a portfolio together and marrying that with roll up your sleeves due diligence, it just improves your odds of outperforming and protecting in poor markets.

And if I can just show one more slide, Operator, if you can put up slide 17, because I think this is important to protecting in poor markets is as valuable to the end unitholders as is participating in strong bull markets. And you can see here what we're showing you is 60% of the time we outperform in down markets, which shows that we have a relatively defensive portfolio.

And remember that those dividends, they kind of unhook you from the market. They pay you in good times and they pay you in bad markets as well.

Great. Thank you for that. And so, yeah, for investors looking for a reliable income as well, in addition to what Alex just said, this fund currently pays a 4.2% annual yield paid monthly.

On top of that, this is quite a unique mandate, being a pure Canadian equity balanced mandate, and invests in dividend paying companies with a focus on small and mid-cap companies.

So, Alex, for those investors looking to invest here at home in Canada, can you explain to them how this fund is unique and fits into investor’s portfolio strategies?

Yeah, because of course, what's cool about this product is we invest in all types of yields products seeking, you know, the best risk/reward instruments in a company's capital structure.

So for example, in the fixed income side, we really focus in on short duration, high quality bonds. And on the equity side, we really concentrate on the preservation of capital, but we really don't want to sacrifice equity upside.

So we keep our payout ratio really low and our payout ratio is the amount that companies pay out to finance their dividend. And the beauty of that is it means you got a lot of leeway if the management wants to increase the dividend or if the company hits a hard time, it means that they don't necessarily have to cut it because they built in a buffer, which is really neat.

And then, you know, you were asking what's unique about this product, the active share, in this fund is really high, so that helps you, that helps us protect in bear markets and really helps us grow the portfolio in good markets as well.

So, you know, we really focus in on purchasing power because inflation is such a topic today. And our dividend growth rate, as you saw on that one slide, was significantly better than inflation, but it was also better than what the TSX will provide you as well. You know, we provide stable, consistent monthly dividends and those dividends are tax advantaged.

Again, as we talked about earlier. And then our universe is significantly better than our competitors’ universe, which gives us so many more opportunities to find those great gems out there.

Perfect. Yes. So, yeah, Thank you, Alex. That was a great session. I know my clients will certainly appreciate the information. And I also want to say thank you to all of our advisors who tuned in to watch.

So for everyone on today's webinar, we will be sending out an email with our new NCM Income Growth Class marketing piece. So it discusses the options of being able to have a monthly distribution with this fund or going with a total return option and what that means for your clients.

If there's any more information you would like to see, please reach out to your local wholesaler or send us a note at

Have a great day, everybody, and we will see you soon. Thanks.

Alex: Thank you.


The information in this video is current as of May 17, 2023 but is subject to change. The contents of this video (including facts, opinions, descriptions of or references to, products or securities) are for informational purposes only and are not intended to provide financial, legal, accounting or tax advice and should not be relied upon in that regard. The communication may contain forward-looking statements which are not guarantees of future performance. Forward-looking statements involve inherent risk and uncertainties, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.



Alex Sasso, CFA

Chief Executive Officer and Portfolio Manager of NCM Small Companies Class and NCM Income Growth Class.