Guardian Capital Global Dividend
Mandate commentary
Q1 2025
Highlights
① The mandate’s high-quality bias and balance between secular growth and low economic sensitivity, coupled with the strategy’s dividend quality requirement and international exposure, has been a source of relative strength this quarter.
② Tariffs cast shadow over consumer confidence.
③ Bank of Canada and U.S. Federal Reserve monetary policies diverge.
Mandate overview
The mandate outperformed its benchmark, the MSCI World Index, during the quarter. The overall sector allocation and stock selection were positive. The energy, consumer discretionary and financials sectors contributed the most to relative performance. Insurance companies and waste management industry stocks added value as they are viewed by investors as safe havens during this period of elevated market volatility, due to their consistent cash flows. The information technology and real estate sectors lagged this quarter. The mandate’s underweight position in both these sectors led to a positive allocation; however, negative stock selection offset those gains.
Mandate: High quality and balance led to relative strength.
Performance contributors
Allianz: Allianz was a top contributor this quarter. The company reported record operating profits during the quarter with strong results across all business segments, particularly its Life/Health and Property-Casualty insurance businesses. Allianz announced a new share buyback program and increased its dividend.
Republic Services: Republic Services (RSG) was the second-best position this quarter. The company reported strong financial results, surpassing prior guidance for earnings, free cash flow and margins. RSG also delivered a strong outlook for revenue and margin expansion supported by pricing and strategic acquisitions. The company continues to return capital to shareholders by maintaining a consistent dividend payment.
Performance detractors
Broadcom: Broadcom was the weakest position this quarter and the company detracted the most from relative performance. The company continues to benefit from increasing demand for custom artificial intelligence (AI) chips, positioning itself as a leader in the AI upgrade cycle. Revenue growth exceeded expectations, supported by strength across the business. But despite record-breaking revenue and profitability, semiconductor stocks faced pressure amid fears of a global economic slowdown and reduced demand leading to valuation concerns.
Novo Nordisk: Novo Nordisk's stock underperformed during the quarter as results from the Phase lll clinical trial for its next-generation obesity drug, CagriSema, came in slightly under the company’s target. The trial, involving 3,400 patients, achieved a weight loss of 22.7% over 68 weeks compared to the company's target of 25%. Novo Nordisk is a leader in the weight loss category.
Total gross returns:
Total return |
QTD |
YTD |
1YR |
3YR |
5YR |
SINCE INC. (FEB. 18, 2025) |
GUARDIAN CAPITAL GLOBAL DIVIDEND |
-4.53%
|
Mandate repositioning
The portfolio management team believes that in this current macro-economic environment, profitability, stability and safety need to be embraced, so the portfolio focuses on companies with positive earnings growth coupled with strong dividend growth. This quarter, the portfolio management team sold Canadian Natural Resources Limited (CNQ). CNQ was a low-conviction position weight given the weakening economic backdrop in Canada. With the proceeds from CNQ, the manager increased positions in Axa and Allianz, given the companies’ high and stable yields, along with the relative strength seen in Europe. Over the past 12 months, 95% of the companies in the portfolio have increased their dividends.
The strategy has overweight positions in the energy, consumer staples, health care and industrials sectors and underweight positions in consumer discretionary, communication services, materials and utilities. Regionally, the strategy has approximately 26.5% weight in Europe, 72% in North America, and 1.5% in Asia and the Pacific Basin.
Market overview: increased uncertainty in U.S. markets favoured international equities
Investor sentiment turned cautious in the first quarter of 2025, driven by heightened market uncertainty following significant shifts in U.S. trade policy under President Trump. Abrupt tariff changes targeting major trade partners — notably Canada, Mexico and China — increased volatility and pressured equity market performance, particularly affecting the S&P 500 Index. In contrast, European markets outperformed significantly, reflecting investors' preference for Europe's attractive valuations and perceived stronger growth potential.
Despite trade-related headwinds, global manufacturing activity showed resilience, signalling potential earnings growth ahead, provided trade tensions stabilize. Central banks diverged in response: the Bank of Canada proactively lowered its overnight rate to 2.75% to bolster growth amid trade uncertainties, while the U.S. Federal Reserve maintained its rate at 4.5%, viewing tariff-related inflation impacts as temporary.
Market outlook: U.S. tariff concerns may temper earning expectations.
Looking ahead, we remain optimistic, despite recent market volatility and lingering uncertainties. While U.S. equities have faced challenges, including a pullback from February highs and sensitivity to tariff concerns, other regions, such as Canada, Europe and emerging markets, offer compelling opportunities. These regions have shown resilience, supported by stronger fundamentals and more attractive valuations compared to U.S. markets. As long as unemployment remains low, consumption is expected to continue at a steady pace, supporting economic growth. Despite short-term turbulence, global opportunities continue to emerge, and maintaining a long-term perspective will be key to navigating this market volatility.
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