True to its name, the $923.3 million DWS CROCI Equity Dividend Fund (KDHIX) makes good use of dividend stocks. The fund’s trailing 12-month (TTM) yield was 2.45% on Tuesday.
This return has contributed to a total return of -3.87% in what has been a difficult year so far. That was well ahead of the broader market in the form of the S&P 500, which fell 19.11%. It also outperformed its large-cap value peers tracked by Morningstar Direct, which posted an average loss of 10.38%.
It also outperformed its bugbear, the Russell 1000 Value Index, which fell 11.75%.
So the return from dividend stocks has helped this fund climb into the relatively small, elite group of diversified U.S. equity funds that have been outperforming the broad market this year.
Additionally, the fund’s TTM return was a full percentage point higher than the return of the $247.2 billion Vanguard 500 Index Fund (VFINX), which tracks the S&P 500.
Another factor in the fund’s recent relative strength is its concentrated approach. She limits her portfolio to around 40 holdings. As of March 31, she owned 41.
That shows the confidence that fund manager Di Kumble has in her best investment ideas.
Overall, the fund pursues a value-oriented strategy. As stated on the fund’s website, “DWS CROCI Equity Dividend Fund seeks targeted exposure to US equities that offer sustainable dividend characteristics and trade at attractive economic valuations.”
“CROCI” in the Fund’s name stands for Cash Return on Capital Invested.
A stock’s CROCI rating measures what DWS calls a company’s economic value, rather than its book value, which is determined by metrics such as return on equity and book value.
Strong CAN SLIM properties
However, IBD readers should recognize many holdings. drug manufacturer note (MRK) and Pfizer (PFE) and beverage manufacturers Coke (KO) were new members of the IBD 50.
The IBD 50 is IBD’s showcase of leading growth stocks that demonstrate strong relative price strength and quality fundamentals.
Merck, Pfizer, Coke and 14 other holdings have IBD Composite Ratings of 90 or higher.
A composite rating of 90 means that a stock is in the top 10% of all stocks on a number of technical and fundamental factors, including both price performance and earnings. Look for stocks that have composite ratings of 90+ and are forming bases or are in repeat buy areas. That way, you’ll spot the best-positioned stocks before they start a big price run. Look up a stock’s composite rating at IBD Stock Checkup.
And 15 holdings have IBD’s SMR rating (which measures sales, profit margin, and return on equity) of A. This scale ranges from A to E. An A score is within the top 20% of all stocks based on this scale.
Where this fund finds dividend stocks
Where does this fund find its dividend stocks? Consumer staples is the fund’s top sector as of March 31 with a 32% weighting. Healthcare was next at 21%. Financials followed in third place with 14%.
Included are consumer staples holdings as of May 31st Phillip Morris International (PM) and Kellogg (K). The cigarette maker is up 7.6% this year. The dividend yield is 5.1%. The cereal maker leads by 13.23% with a 3.2% dividend yield.
Healthcare dividend-paying stocks in the portfolio included drugmaker Merck, that’s up 22.39% this year. The drugmaker is the fund’s #4 stock and has a dividend yield of 3.0%. Manufacturers of health products Johnson&Johnson (JNJ) is up 6.22% and has a dividend yield of 2.6%.
Financial Services Stocks JPMorgan Chase (JPM), Bank of New York Mellon (BK) and U.S. Bancorp (USB) were the Fund’s ninth, tenth and eleventh holdings. JPMorgan lost 26.71% for the year. It has a dividend yield of 3.6%.
The Bank of New York Mellon is down 25.79%. The dividend yield is 3.3%.
US Bancorp is down 15.42%. The dividend yield is 4.0%.
Great selection of dividend stocks
Included are some of the fund’s other dividend stocks Lyondell Basell Industries (LYB). It has a dividend yield of 5.6%.
Based in the Netherlands, the company manufactures chemicals and polymers that are turned into used packaging, home furnishings and automotive components. Shares are up 3.2% this year. But they are down 25% since June 7th. The share price has probably declined on investors’ fears of a recession. Nevertheless, the materials manufacturer should benefit from a global expansion in GDP.
consumer electronics chain best buy (BBY) has a dividend yield of 5.3%. Still, the stock price is down 32.5% this year. The shares trade below 68. That’s less than halfway from its 52-week high near 142 on Nov. 22.
Other high-yielding dividend stocks in the portfolio include the cigarette maker Altria group (MO), down 7.05% this year, with a return of 8.7%.
“Big Blue” International business machine (IBM) is up 8.04% this year. The dividend yield is 4.8%.
And biotech Gilead Sciences (GILD) is down 12.11% this year. The dividend yield is 4.7%.
Class A Shares (KDHAX) require a minimum initial investment of $1,000. Whatever share class, is this fund suitable as a long-term core of your portfolio? Or is it a lifeboat best used in stormy markets? You decide. The fund has underperformed the S&P 500 by 7.57% versus 11.54% and 9.79% versus 13.08% over the past five and 10 years.
Follow Paul Katzenff on Tweet @IBD_PKatzeff for tips on retirement planning and on actively managing portfolios that consistently outperform and are among the best investment funds.
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