Scotia Canadian Dividend Fund Review for Canadian Investors

Investment Objective and Strategy

The Scotia Canadian Dividend Fund has a clearly defined investment objective focused on income generation. The fund aims to earn a high level of dividend income while also providing some potential for long-term capital growth. To achieve this, the fund invests primarily in a diversified portfolio of dividend-paying companies located in Canada. The portfolio managers at 1832 Asset Management LP actively select and manage these securities with the goal of adding value and reducing risk for investors. The fund falls under the category of Canadian equity funds, which are known for their long-term growth potential accompanied by a higher risk level compared to income or balanced funds. This strategy makes the fund potentially appealing to investors who are seeking regular income from their investments alongside exposure to the Canadian stock market.

Fund Structure and Series

The Scotia Canadian Dividend Fund is offered in different series, each with its own fee structure and minimum investment requirements. The Series A is a common retail series available to individual investors, and the fund also offers an I Series, which is often associated with institutional or higher-tier investments. Each series represents an investment in the same underlying portfolio of assets but differs in its cost and sometimes its distribution schedule. The fund is structured as a mutual fund trust, and distributions to unitholders are a key feature of its design, with the final distribution for each taxation year paid by December 31. It is crucial for investors to review the specific prospectus for the series they are considering to understand all associated fees and terms, as the fund is not guaranteed or insured by the Canada Deposit Insurance Corporation or any other government deposit insurer. The fund's value changes frequently, and past performance may not be repeated, which is a standard characteristic of mutual fund investments.

Risk Profile and Suitability

1832 Asset Management LP has assigned the Scotia Canadian Dividend Fund a medium risk rating. This rating reflects the fund's exposure to the volatility of the Canadian equity market, and while the focus on dividend-paying companies can sometimes provide a measure of stability, the fund's value will fluctuate with market conditions. Canadian equity funds, including this one, carry additional risk beyond what is customary for more conservative income and balanced funds, and they typically include securities from a variety of sectors and industries for added diversification. Given this risk profile, the fund is generally considered best suited for long-term investors with an investment horizon of at least five years, which aligns with the higher risk tolerance associated with these types of funds. Investors should assess their own risk tolerance and investment goals before considering this fund, as the fund's performance is not guaranteed and past returns are not indicative of future results. The indicated rates of return are historical annual compounded total returns including changes in unit value and reinvestment of all distributions, and they do not take into account sales charges or taxes.

Fees, Costs, and Minimums

Investing in the Scotia Canadian Dividend Fund involves several types of costs that can affect overall returns. Like most mutual funds, it charges management fees, and for certain series like Series A, there are commissions and trailing commissions paid to advisors. All fees are detailed in the fund's prospectus, which investors must read before investing, as these costs reduce the investor's net return. The fund has established minimum investment amounts to accommodate different levels of participation, with the initial minimum investment set at $500, making it accessible for many retail investors. For subsequent investments after the initial purchase, the minimum drops to $25, and these costs and minimums are critical factors for investors to consider when calculating the net return on their investment.

Commissions, trailing commissions, management fees, and expenses are all associated with investments in this mutual fund. These costs are detailed in the fund's prospectus, which investors must read before investing. The fees reduce the overall return on an investment. Mutual funds are not guaranteed by the Canada Deposit Insurance Corporation or any other government deposit insurer.

• Commissions may be charged on the purchase or sale of fund units.
• Trailing commissions are ongoing fees paid to the investor's advisor.
• Management fees are charged for the professional oversight of the fund.
• Other fund expenses are incurred for operational costs.
• All these fees reduce the investor's overall return.
• The fund's prospectus contains the complete and official fee schedule.

It is necessary for investors to understand all fees before making an investment decision. The indicated historical annual compounded total returns include changes in unit value and reinvestment of all distributions. These historical returns do not take into account sales, redemption, distribution, or optional charges. They also do not account for income taxes payable by any security holder, which would have reduced returns.

Distributions and Tax Implications

The Scotia Canadian Dividend Fund makes regular distributions to its unitholders, which is a core part of its income-oriented objective. Distributions are typically paid monthly, by the last business day of each month, though some series may pay on a quarterly schedule, other than in December. The final distribution for each taxation year is paid or payable by December 31 of each year or at such other times as may be determined by the fund’s Manager. These distributions can consist of different types of income, each with distinct tax treatments, and they are taxable in the hands of the investor in the year they are received. Investors can choose to have these distributions automatically reinvested to purchase additional units or receive them in cash, and it is important not to confuse a fund's distribution rate with its performance, rate of return, or yield.

Distributions from the fund may consist of net income, dividends, or net realized capital gains. The composition of these distributions can vary from payment to payment and from year to year. Distributions are taxable in the hands of the investor. Monthly distributions are typically made by the last business day of each month.

• Distributions can consist of net income from the fund's holdings.
• They often include dividends received from the underlying Canadian stocks.
• Distributions may also contain net realized capital gains from portfolio trades.
• For corporate class fund series, capital gains dividends are distributed within 60 days following the calendar year end.
• Each type of distribution has a different tax treatment for the investor.
• Monthly distributions are made by the last business day of each month.
• Quarterly distributions are made by the last business day of each calendar quarter.

Investors should plan for the tax consequences of receiving these distributions, as they are taxable. The fund's distributions are automatically reinvested unless an investor elects to receive them in cash. The final distribution for each taxation year is paid by December 31. Investors should not confuse a fund's distribution rate with its performance, rate of return, or yield.

Historical Performance and Considerations

The Scotia Canadian Dividend Fund's historical performance provides context, though it is not a predictor of future results. Performance data varies by series, with the I Series showing specific annualized returns for different periods, such as a year-to-date return of 11.83 percent and a one-year return of 16.50 percent. The three-year annualized return for the I Series was 17.75 percent, and over a five-year period, the annualized return was 11.96 percent. These returns are historical annual compounded total returns that include changes in unit value and the reinvestment of all distributions, and they do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Performance data underscores the fund's potential for growth but also highlights the variability inherent in equity investing, and mutual funds are not guaranteed, with their values changing frequently.

Related Scotia Dividend Products

Scotiabank offers other products linked to the performance of the Scotia Canadian Dividend Fund, providing different risk and return structures. One notable product is the Scotia Dividend Fund GIC, which combines features of a Guaranteed Investment Certificate with mutual fund growth potential, giving you guaranteed principal repaid at maturity. This product guarantees the repayment of the principal investment at maturity, and the potential to earn income at maturity is tied to the performance of the Scotia Canadian Dividend Fund. This structure offers a lower-risk alternative for investors who want some exposure to the fund's strategy but with capital protection, and it is important to understand that the mutual fund itself does not offer any guarantee on principal, unlike the GIC product.

The Scotia Dividend Fund GIC is a distinct product from the Scotia Canadian Dividend Fund mutual fund. It combines mutual fund growth potential with a guarantee of principal repayment at maturity. This product gives investors the potential to earn income at maturity tied to the performance of the Scotia Canadian Dividend Fund. It represents two investments in one by combining growth potential with a guarantee.

• The principal investment is guaranteed to be repaid at maturity.
• The potential income earned is linked to the performance of the Scotia Canadian Dividend Fund.
• It provides mutual fund growth potential within a GIC structure.
• This product is designed for investors seeking principal protection.

The Scotia Dividend Fund GIC illustrates how the fund's investment strategy can be accessed through different financial instruments. This product combines the growth potential of a mutual fund with a guarantee. It guarantees the principal will be repaid at maturity. The potential income earned at maturity is tied to the performance of the underlying Scotia Canadian Dividend Fund.

Frequently asked questions

Sources and further reading

1. Scotia Canadian Equity Funds scotiafunds.com

This article explains how things work and is not financial, tax or legal advice. Rules, limits and rates change, so check the current figures with the Canada Revenue Agency, your province or your financial institution before you act.