Craig Gradidge CFP ® (@gradidgec) is an investment and retirement planning specialist at Gradidge-Mahura Investment. that matters most to long-term investors – dividends.
The graph below shows the dividends that each fund would have delivered from a R1m investment made when the SDP fund was launched. On this score the PDM has underperformed quite significantly relative to the other two funds. It is also the most expensive of the three and this cost has eaten into dividends quite materially. The SDP is by far the cheapest of the three funds with an annual TER (total expense ratio) of only 0.51%.
The SDP tracks the JSE/FTSE Dividend Plus Index, which represents the 30 high dividend-yielding companies within the universe of the FTSE/JSE Top 40 and FTSE/JSE Mid Cap Index (excluding real estate) that are expected to pay the best normal dividends over the forthcoming year. The fund is rebalanced quarterly and therefore incurs minimal trading fees.
While the SDP scores highly on both capital growth and dividends, this does not imply that it is better than the other two funds. However, the low cost structure does show its value over time as investors get more of the dividend.