True to its name, $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%, going into Tuesday.
That yield contributed to a total return of -3.87% so far this troubled year. That was well ahead of the broad market in the form of the S&P 500, which was down 19.11%. It also topped its large-cap value rivals tracked by Morningstar Direct, which averaged a loss of 10.38%.
It also surpassed its bogey, the Russell 1000 Value Index, which was down 11.75%.
Dividend Stocks
So, yield derived from dividend stocks has helped this fund climb into the relatively small, elite group of diversified U.S. stocks funds outdoing the broad market this year.
Further, the fund's TTM yield was a full percentage point higher than the yield by $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. It limits its portfolio to about 40 holdings. It owned 41 as of March 31.
That shows the faith that fund manager Di Kumble has in her best investment ideas.
Overall, the fund pursues a value-oriented strategy. As the fund's webpage puts it, "DWS CROCI Equity Dividend Fund seeks concentrated exposure to U.S. stocks that offer sustainable dividend characteristics and are trading at attractive economic valuations."
"CROCI" in the fund's name stands for Cash Return on Capital Invested.
A stock's CROCI valuation gauges what DWS calls the economic value of a company. Kumble and her team prefer to use that gauge of value rather than a stock's accounting value determined by measurements such as return on equity and book value.
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Strong CAN SLIM Traits
Yet IBD readers should recognize many holdings. Drugmakers Merck and Pfizer and beverage maker Coca Cola were recent members of the IBD 50.
The IBD 50 is IBD's flagship screen of leading growth stocks that show strong relative price strength and top-notch fundamentals.
Merck, Pfizer, Coke and 14 additional 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. Watch for stocks that have 90-plus Composite Ratings and are forming bases or are in follow-on buy areas. That way, you spot the best-positioned stocks before they start big price runs. Look up a stock's Composite Rating at IBD Stock Checkup.
And 15 holdings have IBD's SMR Rating (which measures Sales, profit Margins and Return on equity) of A. That scale runs A through E. An A score ranks in the top 20% of all stocks based on that gauge.
Where This Fund Finds Dividend Stocks
Where does this fund find its dividend stocks? Consumer staples are the fund's top sector as of March 31, with a 32% weighting. Next was health care, at 21%. Financials were third, at 14%.
Consumer staples holdings as of May 31 included Philip Morris International and Kellogg. The cigarette maker is up 7.6% this year. Its dividend yield is 5.1%. The cereal maker is ahead 13.23%, with a 3.2% dividend yield.
Health care dividend stocks in the portfolio included drugmaker Merck, which is up 22.39% this year. The drugmaker is the fund's No. 4 holding and has a 3.0% dividend yield. Health care products maker Johnson & Johnson is up 6.22% and has a 2.6% dividend yield.
Financial services stocks JPMorgan Chase, Bank of New York Mellon and U.S. Bancorp were the fund's ninth, tenth and eleventh holdings. JPMorgan was down 26.71% for the year. It has a 3.6% dividend yield.
Bank of New York Mellon is down 25.79%. Its dividend yield is 3.3%.
U.S. Bancorp is down 15.42%. Its dividend yield is 4.0%.
Wide Variety Of Dividend Stocks
Some of the fund's other high dividend stocks included LyondellBasell Industries (LYB). It has a 5.6% dividend yield.
The Netherlands-based company makes chemicals and polymers that are used packaging, home furnishings and automotive components. Shares are up 3.2% this year. But they're down 25% since June 7. Share price likely pulled back on investor fears of a recession. Still, the materials manufacturer stands to benefit from any global expansion in GDP.
Consumer electronics chain Best Buy has a dividend yield of 5.3%. Still, share price is down 32.5% this year. Shares are trading below 68. That's less than half their 52-week-high near 142 on Nov. 22.
Additional dividend stocks in the portfolio with high yields include cigarette maker Altria Group, down 7.05% this year, with an 8.7% yield.
"Big Blue" International Business Machine is up 8.04% this year. Its dividend yield is 4.8%.
The company has prioritized creation of what IBM calls an open, hybrid cloud platform.
Hybrid cloud architecture means IBM can provide its customers with both a public cloud and a private cloud, which gives a company extra network security, as IBD recently reported.
And biotech Gilead Sciences is down 12.11% this year. Its dividend yield is 4.7%.
A-class shares (KDHAX) of this fund require a $1,000 minimum initial investment. Whichever share class, is this fund suitable as the long-term core of your portfolio? Or is it a lifeboat, best used amid stormy markets? You be the judge. The fund lags the S&P 500 over the past five and 10 years, 7.57% vs. 11.54% and 9.79% vs. 13.08%.
Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about retirement planning and actively run portfolios that consistently outperform and rank among the best mutual funds.
