STOCK DIVIDEND FUND, INC.

 

 

 

 

ANNUAL REPORT

DECEMBER 31, 2019

 

 

 

Stock Dividend Fund, Inc.

8150 N. Central Expressway #M1120

Dallas, Texas 75206

1-800-704-6072

 

Fund Symbol: SDIVX

 

 

Dear Shareholders of Stock Dividend Fund, Inc.,

 

The Fund ended 2019 with a Net Asset Value per share of $28.98, after paying an income dividend of $0.7577 per share and long term capital gain of $0.4915 per share on December 26, 2019, which is up from a Net Asset Value per share of $26.01 at the beginning of the year.

 

For the period December 31, 2018 through December 31, 2019 the total

return of the Fund was up 16.22% versus the S&P 500 up 31.48% and the SPDR Portfolio S&P 500 Value etf which was up 25.20%. A few of our consumer discretionary portfolio holdings such as Kohls, The Gap and Limited Brands underperformed in 2019 and this dragged our relative overall returns.   

 

The Fund continues to hold what we feel are very high quality companies with stable cash flows and relatively conservative and transparent balance sheets.

 

The Fund begins 2020 with a meaningfully above market internal portfolio dividend yield, companies with relatively low debt levels on average, strong cash flows, low retirement and pension liabilities, all of which we would expect to perform well going forward. 

 

Our top holdings and industry group exposures, as of December 31, 2019, are listed on the following page.

 

We look forward to excellent performance in 2020.

 

 

Sincerely,

 

 

 

Steven Adams

Portfolio Manager

 

 

 

 

 

 

STOCK DIVIDEND FUND, INC.

Top Ten Holdings and Asset Allocation

December 31, 2019

 

 

Top Ten Holdings*

(% of Net Assets)

 

Apple Inc.                               8.85%

Bank of America                          6.45%

Universal Corp.                          6.01%

AT&T                                     5.35%

Valero                                   5.18%

Verizon                                  5.13%

Caterpillar Inc.                         4.70%

Kohls Corp.                              4.54%

Intel Corp.                              4.50%

Cummings Inc.                            4.40%

                                        ------

                                        55.10%

 

Asset Allocation

(% of Net Assets)

 

Petroleum Refining                                               13.69%

Telephone Communications, Except Radiotelephone                  10.47%

National Commercial Banks                                        10.03%

Electronic Computers                                              8.85%

Pharmaceutical Preps                                              7.38%

Computer and Office Equipment                                     7.04%

Raw Farm Food                                                     6.01%

Construction Machinery and Equipment                              4.70%

Department Stores                                                 4.54%

Semi Conductors and Related Devices                               4.50%

Engines and Turbines                                              4.40%

Variety Stores                                                    4.23%

Drug Store                                                        3.44%

Women’s Apparel Store                                             3.32%

Malt Beverage                                                     3.18%

Family Stores                                                     3.12%

Other Assets, Less Liabilities, Net                               0.92%

                                                                  -----

                                                                100.00%

 

 

*Portfolio holdings are subject to change and are not recommendations of individual stocks

 

 

 

 

 

 

 

 

 

 

STOCK DIVIDEND FUND, INC.

PERFORMANCE SUMMARY

 

The graph below represents the changes in value for an initial $100,000 investment in the Stock Dividend Fund from its inception, December 27, 2004 to years ending through 2019.  These changes are then compared to a $100,000 investment in the S&P 500 Index for the same period.  Returns shown include the reinvestment of all dividends but do not reflect deduction for taxes a shareholder would pay on distributions or redemption of Fund shares.  Past performance is not predictive of future performance.  Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost.

 

              Inception  Year End Year End Year End Year End Year End Year End

              (12/27/04)  2004     2005     2006     2007     2008    2009

Stock Dividend ---------  -------  -------  -------  -------  ------- --------

Fund           $100,000  $100,680 $107,735 $130,128 $136,817 $87,618 $103,836

S&P 500 Index  $100,000  $100,150 $105,007 $121,588 $128,069 $80,696 $102,049

 

 

               Year End Year End Year End Year End Year End Year End Year End

               2010     2011     2012     2013     2014     2015     2016

Stock Dividend -------  -------  -------  -------- -------  -------  ---------

Fund           $122,973 $132,921 $151,264 $193,996 $188,913 $157,205 $214,380

S&P 500 Index  $117,438 $119,892 $139,063 $184,064 $209,207 $212,094 $237,397

 

               Year End Year End Year End

               2017     2018     2019

Stock Dividend -------  -------  --------

Fund           $263,841 $248,617 $288,946

S&P 500 Index  $289,150 $276,456 $364,369

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCK DIVIDEND FUND, INC.

PERFORMANCE SUMMARY (continued)

 

 

 

 

 

 

$360,000|                                                             

$350,000|                                                             *

$340,000|

$330,000|

$320,000|

$310,000|

$300,000|

$290,000|                                                    *        #

$280,000|                                                         *

$270,000|

$260,000|                                                     #

$250,000|                                                          #

$240,000|                                                *        

$230,000|                                                               

$220,000|                                                 #                            

$210,000|                                         *  *

$200,000|                                                             

$190,000|                                    #   #

$180,000|                                     *

$170,000|

$160,000|                                              #

$150,000|                                #

$140,000|            #                    *

$130,000|        #    *              #

$120,000|         *              #*   *

$110,000|    #*                         

$100,000| #*                 #*

$ 90,000|                #

$ 80,000|                 *

        ______________________________________________________________________

2      2   2   2   2   2   2   2   2   2   2   2   2   2   2   2

0      0   0   0   0   0   0   0   0   0   0   0   0   0   0   0

 0   0   0   0   0   0   1   1   1   1   1   1   1   1   1   1

 4   5   6   7   8   9   0   1   2   3   4   5   6   7   8   9

 

 

#=Stock Dividend Fund       *=S&P 500 Index

 

 

 

 

 

 

 

 

 

 

 

 

STOCK DIVIDEND FUND, INC.

PERFORMANCE SUMMARY (continued)

 

 

 

 

                5 Day   Annual Annual Annual Annual  Annual Annual  Annual

                Return  Return Return Return Return  Return Return  Return

                2004    2005   2006   2007   2008    2009   2010    2011

Stock Dividend  ------  ------ ------ ------ ------  ------ ------  ------

Fund            0.68%   6.65%  21.19% 5.14% (35.96)% 18.51% 18.34%  8.09%

S&P 500 Index   0.15%   4.85%  15.79% 5.33% (36.99)% 26.46% 15.08%  2.09%

 

                Annual Annual Annual  Annual   Annual  Annual Annual

                Return Return Return  Return   Return  Return Return

                2012   2013    2014    2015    2016    2017   2018

Stock Dividend  ------ ------ ------  ------   ------  ------ --------

Fund            13.80% 28.25% (2.62)% (16.78)% 36.37%  23.07%  (5.77)%

S&P 500 Index   15.99% 32.36% 13.66 %   1.38 % 11.93%  21.80%  (4.39)%

 

 

                Annual      Average

                Return   Annual Return

                2019     5 Year   10 Year

Stock Dividend  ------   ------   ------

Fund            16.22%    8.84%    10.76%

S&P 500 Index   31.48%   11.68%    13.54%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCK DIVIDEND FUND, INC.

EXPENSES

DECEMBER 31, 2019

 

As a shareholder of the Fund you incur ongoing costs including

management fees, transaction costs, potential early redemption fees and other operating expenses.  This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.  This example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six month period of June 30, 2018 to December 31, 2019.

 

Actual Expenses

The first line of the table below provides information about actual

account values and actual expenses.  You may use the information in

this line, together with the amount you invested at the beginning of

the period, to estimate the expenses that you paid over the period. 

Simply divide your account value by $1,000 (for example, an $8,500

account value divided by $1,000 equals 8.5), then multiply this result

by the number in the first line under the heading "Expenses Paid During

Period" to estimate the expenses you paid on your account during the

period.

 

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about

hypothetical account values and hypothetical expenses based on the

Fund's actual expense ratio and an assumed rate of return of 5% per

year before expenses, which is not the Fund's actual return.  The

hypothetical account values and expenses may not be used to estimate

the actual ending account balance or expenses you paid for the period. 

You may use this information to compare the ongoing costs of investing

in the Fund to other funds.  To do so, compare this 5% hypothetical

example with the 5% hypothetical examples that appear in the

shareholder reports of other funds.

 

Please note that the expenses shown in the table are meant to highlight

your ongoing costs only and do not reflect any transactional costs such

as sales charges (loads), redemption fees, or exchange fees. 

Therefore, the second line of the table is useful in comparing ongoing

costs only.

 

                                                    Expenses Paid

               Beginning        Ending              During Period*

               Account Value    Account Value       June 30, 2019

               June 30, 2019    December 31, 2019   to December 31, 2019

           -----------------    -----------------   ---------------------

 

Actual            $  1,000.00       $ 1,095.00            $   4.49

 

Hypothetical**    $  1,000.00       $ 1,021.00            $   4.33

 

*Expenses are equal to the Fund's annualized expense ratio of 0.85%,

multiplied by the average account value over the period, multiplied by

184 days/365 days to reflect the one-half year period.

** Hypothetical return assumes 5% return before expenses.

 

 

STOCK DIVIDEND FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES

DECEMBER 31, 2019

 

 

ASSETS

   Investment securities, at fair

          value(cost $23,306,056)           $  33,110,732 

   Dividends receivable                            16,785

                                              -----------

              Total assets                     33,127,517

                                              -----------

 

LIABILITIES

   Advisory fees payable                           23,028

                                              -----------

              Total liabilities                    23,028

                                              -----------

 

NET ASSETS -

   Equivalent to $28.98 per

   share based on 1,142,379 shares

   of common stock issued and outstanding;

   100,000,000 shares authorized,

   $0.001 par value                          $ 33,104,489

                                             ============

 

NET ASSETS CONSIST OF:

  Common stock                               $      1,142

  Paid-in capital                              23,298,671

  Net unrealized appreciation                   9,804,676

                                             ------------

Net assets                                   $ 33,104,489

                                             ============

 

Net asset value per share                    $      28.98

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

STOCK DIVIDEND FUND, INC.

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2019

 

DESCRIPTION                                 SHARES      MARKET VALUE

-----------                                 ------           -------

 

COMMON STOCKS – 99.08%

                                                                   

Petroleum Refining-13.69%                                           

   Valero Energy Corp                       18,302      $   1,713,982

   Chevron Corp.                            11,838          1,426,597

   Exxon Mobil                              20,764          1,448,912

                                                            ---------

                                                            4,589,491

 

Semi-Conductors and Related Devices-4.50%

   Intel Corp                               24,896          1,490,026

 

Telephone Communications, Except

Radiotelephone-10.47%

   Verizon                                  27,638          1,696,973

   AT&T                                     45,199          1,766,377

                                                            ---------

                                                            3,463,350

 

Computer and Office Equipment-7.04%

   Hewlett Packard Inc.                     59,853          1,229,979

   International Business Machines Corp.     8,205          1,099,798

                                                            ---------

                                                            2,329,777

 

Construction Machinery and Equipment-4.70%

   Caterpillar Inc.                         10,533          1,555,513

 

Engines and Turbines-4.40%

   Cummins Inc.                              8,148          1,458,166  

 

National Commercial Banks-10.03%

   Bank of America                          60,645          2,135,917

   Wells Fargo                              22,018          1,184,568

                                                            ---------

                                                            3,320,485

 

Electronic Computers-8.85%

   Apple Inc.                                9,976          2,929,452

 

Variety Stores-4.23%

   Walmart                                  11,771          1,398,866 

 

Family Stores-3.12%

   Gap Inc.                                 58,422          1,032,901

 

Department Stores-4.54%

   Kohl’s Corp.                             29,512          1,503,636

 

 

 

-        Continued –

STOCK DIVIDEND FUND, INC.

SCHEDULE OF INVESTMENTS, continued

DECEMBER 31, 2019

 

DESCRIPTION                                 SHARES        MARKET VALUE

-----------                                 ------        ------------

 

Women’s Apparel Store-3.32%

   L Brands                                 60,607         $ 1,098,199

 

Raw Farm Food-6.01%

   Universal Corp.                          34,886           1,990,595

 

Malt Beverage-3.18%

   Molson Coors Beverage Co.                19,523           1,052,290

 

Pharmaceutical Preps-7.38%

   AbVie Inc.                               15,379           1,361,657

   Pfizer                                   27,662           1,083,797

                                                             ---------

                                                             2,445,454

 

Drug Store-3.44%

  CVS Health Corp                           15,313           1,137,603

 

                                                            ----------

                                  

   Total common stocks (cost $22,991,129)                $  32,795,804

                                                            ----------

 

 

 

SHORT-TERM INVESTMENTS – 0.01%  

   Schwab Money Market Fund (Single Class Fund)      

              -current interest at 0.30%    314,927    $       314,927

                                                              --------

  

   Total short-term investments (cost $   314,927)             314,927

                                                              --------

 

Total investment securities – 99.98% (cost $23,306,056)     33,110,732

 

Other assets less liabilities – 0.02%                           (6,243)

                                                              --------

 

Net assets - 100.00%                                   $    33,104,489

                                                          ============

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

STOCK DIVIDEND FUND, INC.

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2019

 

 

 

INVESTMENT INCOME

   Dividends                                             $  1,084,945  

   Interest                                                     1,844

                                                         ------------

          Total investment income                           1,086,789

                                                         ------------

 

EXPENSES -

   Advisory fees                                              256,855        

                                                             --------

          Total Expenses                                      256,855

                                                             --------

 

          Net investment income                               829,934

                                                         ------------

 

GAIN(LOSS)ON INVESTMENTS -

   Net realized gain on investments                           538,351  

   Net decrease in unrealized appreciation                  3,200,545

     of investments                                       ------------ 

 

         Net realized gain and unrealized loss

           on investments                                   3,738,896

                                                         ------------

  

   Net increase

        in net assets resulting from operations          $  4,568,830

                                                         ============

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

STOCK DIVIDEND FUND, INC.

STATEMENTS OF CHANGES IN NET ASSETS

 

 

                                          Year Ended      Year Ended

                                          Dec 31, 2019    Dec. 31, 2018

 

INCREASE(DECREASE) IN NET ASSETS

FROM OPERATIONS:

   Net investment income                    $   829,934    $    717,256

   Net realized gain (loss)on investments       538,351       1,412,073

   Unrealized appreciation(depreciation) 

     of investments                           3,200,545     (3,771,780)

                                            -----------    ------------

      Net increase (decrease) in net assets

      resulting from operations               4,568,830     (1,642,451)

          

 

DISTRIBUTIONS TO SHAREHOLDERS FROM                                 

   Net investment income                       (829,934)       (717,256)

   Realized gains                              (538,351)     (1,412,073)

                                            -----------    ------------

         Total Distributions                 (1,368,285)     (2,129,329)

 

CAPITAL SHARE TRANSACTIONS-NET                1,630,565        (340,177)

                                            -----------    ------------

 

TOTAL INCREASE (DECREASE) IN NET ASSETS       4,831,110     (4,111,957)

 

NET ASSETS, beginning of year                28,273,379      32,385,336 

                                            -----------    ------------

 

NET ASSETS, end of year (includes          $ 33,104,489    $ 28,273,379

   undistributed net income of $- and       ===========    ============

   $-, respectively)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

 

STOCK DIVIDEND FUND, INC.

FINANCIAL HIGHLIGHTS

 

PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR

ENDED:

                        YEAR     YEAR      YEAR     YEAR     YEAR

                        ENDED    ENDED     ENDED    ENDED    ENDED

                        2019     2018      2017     2016     2015         

                        -----    ------    ------   ------   ------

Net asset value,

  beginning of year     $26.01   $29.93    $26.61   $20.31   $25.26

                        ------   ------    ------   ------   ------

Income (loss)from investment

operations:

  Net investment income  0.76      0.71      0.70     0.61     0.71

  Net realized and

  unrealized gain

  (loss)on investments   3.46     (2.51)     5.44     6.78    (4.95)

                         ----    ------     -----     -----    -----

Total from                                      

  investment operations 4.22     (1.80)     6.14     7.39    (4.24)

                         ----    ------     -----     -----    -----

Less distributions from:

  Net investment income (0.76)    (0.71)    (0.75)    (0.62)   (0.71)

  Net realized gains    (0.49)    (1.41)    (2.07)    (0.47)    0.00

                        -----     ------    ------   ------   ------

    Total distributions (1.25)    (2.12)    (2.82)    (1.09)   (0.71)

                        -----     ------    ------   ------   ------

Net asset value,

  end of year          $28.98     $26.01    $29.93    $26.61   $20.31

                       ------     ------    ------   ------   ------

 

Total Return            16.22%    (5.77)%    23.07    36.37%  (16.78)%

 

Net assets, end of            

   year(in 1000's)     $33,105   $28,273   $32,385   $30,726  $23,617

 

Ratio of expenses to

   average net

   assets(a)             0.85%     0.86%    0.85%     0.87%     0.87%

 

Ratio of net investment

   income to average net

   assets                2.74%     2.24%    2.37%     2.52%     2.74%

 

Portfolio turnover

   rate (annualized)    14.41%    28.64%   41.45%    29.83%    37.61%

 

 

(a) The Fund's actual expenses are calculated daily at 0.85% of net          

asset value (NAV).

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

STOCK DIVIDEND FUND, INC.

NOTES TO FINANCIAL STATEMENTS

 

1. ORGANIZATION

 

Stock Dividend Fund, Inc. (the "Fund") was incorporated in the

State of Texas on April 6, 2004 and is registered under the

Investment Company Act of 1940 as a non-diversified, open-end

management investment company.  The investment objective of the

Fund is to achieve growth and income by investing primarily in

dividend paying common stocks.  The effective date of the Fund's

registration with the SEC was November 29, 2004.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

The accompanying financial statements have been prepared on the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America.

 

Use of Estimates

The preparation of financial statements in conformity with U.S.

generally accepted accounting principles requires management to

make estimates and assumptions that affect the reported amounts

of assets and liabilities and disclosure of contingent assets

and liabilities at the date of the financial statements and the

reported amounts of increases and decreases in net assets from

operations during the reporting period.  The Fund’s significant

estimates include primarily the fair value of investments. 

Actual results could differ from these estimates.

 

Security Valuation

Securities listed on a national securities exchange or in the over-

the-counter market are valued at the last quoted sales price on the

day of valuation, or if no quoted sales price was reported on that

date, the last quoted bid price.  Short-term investments are valued

at cost which approximates fair value.  Securities for which

quotations are not readily available are valued at their estimated

fair value as determined in good faith by the Fund's Board of

Directors.

 

Securities Transactions and Investment Income

Securities transactions are recorded on a trade-date basis. 

Dividend income is recorded on the ex-dividend date and interest

income is recorded on the accrual basis.  Realized gains and losses

are determined on a specific identification basis of the securities

sold.  Unrealized gains and losses resulting from the appreciation

and depreciation of securities carrying values are included in the

statements of operations.

 

Distribution of Income and Gains

The Fund declares and pays dividends annually from net investment

income and from net realized gains, if any.  Distributions from

realized gains for book purposes may include short-term capital

gains, which are included in ordinary income for tax purposes. 

Dividends are paid upon Board approval by the end of each calendar year.

 

STOCK DIVIDEND FUND, INC.

NOTES TO FINANCIAL STATEMENTS

 

 

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Federal Income Taxes

The Fund's policy is to continue to comply with the requirements of the

Internal Revenue Code that are applicable to regulated investment

companies and to distribute all of its taxable income, including

any realized gains on investments, to its shareholders.  The Fund also intends to distribute sufficient net investment income and net capital gains, if any, so that it will not be subject to excise tax on undistributed income and gains.  Therefore, no federal income tax or excise provision is required.

 

Net investment income (loss), net realized gains (losses) and the

cost of investments in securities may differ for financial

statement and income tax purposes.  The character of distributions

from net investment income (loss) or net realized gains (losses) may differ from

their ultimate characterization for income tax purposes.  At December

31, 2019, there were no material differences.  Also, due to the

timing of dividend distributions, the fiscal year in which amounts

are distributed may differ from the year that the income or

realized gains were recorded by the Fund.

 

Subsequent Events

Subsequent events were evaluated through February 14, 2019, the date the financial statements were available for issuance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCK DIVIDEND FUND, INC.

NOTES TO FINANCIAL STATEMENTS

 

 

3.    FAIR VALUE OF INVESTMENTS

 

In accordance with U.S. generally accepted accounting principles (“GAAP”), fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP also establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund's own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.

 

Level 1 - quoted prices in active markets for identical investments.

 

Level 2 - observable inputs other than quoted prices(including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

 

Level 3 - significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)

 

The following table summarizes the valuation of the Fund's investments by the above fair value hierarchy levels as of December 31, 2019:

 

                                    Investments          Other

                                    in                   Financial

      Level                         Securities           Instruments *

      -----                         ----------           -----------

      Level 1:

         Common Stock               $32,795,805          $          0

         Short term investments         314,927                     0

                                    -----------          ------------

            Total Level 1:           33,110,732                     0

      Level 2                                 0                     0

      Level 3                                 0                     0

                                    -----------          ------------

      Total                         $33,110,732          $          0

                                    ===========          ============

 

   * Other financial instruments are derivative instruments not reflected

in the Portfolio of Investments, such as futures forwards and swap contracts, which are valued at the unrealized appreciation / depreciation on the

instrument.  As of December 31, 2019, the Fund did not own any other financial instruments.

   

 

 

STOCK DIVIDEND FUND, INC.

NOTES TO FINANCIAL STATEMENTS

 

 

3. FAIR VALUE OF INVESTMENTS (continued)

 

Transfers between levels are recognized at the end of the

reporting period.  There were no transfers between level 1 and  

level 2 during the year.  There were no level 3 investments held by 

the Fund during the year ended December 31, 2019.

 

 

4. CAPITAL SHARE TRANSACTIONS

Capital share transactions in the Fund's $0.001 par value common

stock were as follows:

 

 

                          Year Ended             Year Ended

                       December 31, 2019     December 31, 2018

                       -------------------   -------------------

                       Shares       Amount     Shares       Amount

Shares sold           83,604   $ 2,384,880    28,028   $   838,974

Shares issued in

  reinvestment of

  dividends           47,085     1,368,286    84,598     2,129,329

                     --------     --------   --------    ---------

                     130,689     3,753,166   112,626     2,968,329

 

Shares redeemed      (75,349)   (2,122,600) (107,524)   (3,308,421)

                     --------     --------   --------    ---------

Net increase(decrease)55,340     1,630,566     5,102      (340,118)

 

Beginning of year  1,087,039    21,669,248 1,081,937    22,009,366

                   ----------   ---------- ---------    ----------

End of year        1,142,379  $ 23,299,814 1,087,039  $ 21,669,248

                   ==========   ==========  =========   ==========

 

5.  INVESTMENT TRANSACTIONS

 

The aggregate cost of purchases and proceeds from sales of investment

securities, excluding short-term investments, aggregated $5,595,585

and $4,341,639, respectively, for the year ended December 31, 2019.

 

6. TAX MATTERS

 

Income and long-term capital gain distributions are determined in accordance with Federal income tax regulations, which may differ from accounting principles generally accepted in the United States.

 

On December 26, 2019, the Fund paid an income distribution of $0.7577 per share to shareholders of record on December 24, 2019 for a total distribution of $829,934, and a long-term capital gain distribution of $0.4915 per share for a total distribution of $538,351.

 

On December 21, 2018, the Fund paid an income distribution of $0.7148 per share to shareholders of record on December 20, 2018 for a total distribution of

 

STOCK DIVIDEND FUND, INC.

NOTES TO FINANCIAL STATEMENTS

 

 

6. TAX MATTERS (continued)

 

$717,256, and a long-term capital gain distribution of $1.4073 per share for a total distribution of $1,412,073.

 

On December 22, 2017, the Fund paid an income distribution of $0.7500 per share to shareholders on December 21, 2017 for a total distribution of $741,902, and a long-term capital gain distribution of $2.0694 per share for a total distribution of $2,046,986.

 

The Fund’s distributable earnings on a tax basis are determined only at the end of each fiscal year.  As of December 31, 2019, the Fund’s most recent fiscal year-end, the components of distributable earnings on a tax basis were as follows:

 

Unrealized Appreciation                    $  9,804,676

Undistributed Realized Long-Term Gains     $          0

Undistributed Ordinary Income              $          0

                                            -----------

   Total Distributable Earnings, Net       $  9,804,676

 

As of December 31, 2019, the tax basis components of unrealized appreciation (depreciation) and cost of investments were as follows:

 

Gross tax appreciation of investments      $ 10,489,264

Gross tax depreciation of investments      $   (684,588)

                                              ---------

Net tax appreciation of investments        $  9,804,676

 

Federal tax cost of investments,

   Including short-term investments        $ 23,306,056

 

 

As of December 31, 2019, open Federal tax years, subject to examination, include the tax years ended December 31, 2017 through December 31, 2019.   As of and during the year ended December 31, 2018, the Fund did not have a liability for any unrecognized tax benefits.  The Fund has no examination in progress and is not aware of any tax positions for which it is reasonably possible that the total tax amounts of unrecognized tax benefits will significantly change in the next twelve months.

 

 

7. ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES

 

The Fund and the Advisor are under common control and the existence

of that control may create operating results and financial position

different than if they were autonomous.

 

The Fund has an investment advisory agreement with Adams Asset Advisors,

LLC (the "Advisor") to provide investment advisory services to the

Fund. Steven Adams is managing member of the Advisor and is also

an officer and shareholder of the Fund, and his wife, Laura S. Adams is a member of the Advisor and also a director of the Fund.  Under the terms

STOCK DIVIDEND FUND, INC.

NOTES TO FINANCIAL STATEMENTS

 

 

7. ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)

 

of the agreement, the Fund will pay the Advisor a monthly fee at

the annual rate of 0.85% of the Fund's average daily net assets. 

 

The fee is computed daily and payable monthly.  The Advisor has

contractually agreed to pay all operating expenses of the Fund,

except brokerage fees and commissions, interest, taxes and

extraordinary expenses.

 

The advisory fee for 2019, as computed pursuant to the investment advisory agreement, totaled $256,855, of which $23,028 was payable on December 31, 2019.

 

The Advisor acts as the transfer agent for the Fund, with Fidelity Investments as the sub-transfer agent.  There are no fees associated with these services.

 

The Fund acts as its own custodian, effective September 1, 2008, and is in compliance per requirements of Rule 17f-2.  There are no fees associated with these services.

 

8.  REDEMPTION FEE

To discourage short-term trades by investors and to compensate the Fund for costs that may be incurred by such trades, the Fund may impose a redemption fee of 2% of the total redemption amount if shares are held less than 365 days.  For the year ended December 31, 2019, there were no redemption fees received by the Fund.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADDITIONAL INFORMATION (Unaudited)

 

PROXY VOTING INFORMATION

Stock Dividend Fund, Inc. management is responsible for exercising the

voting rights associated with the securities held by the Fund.  A

description of our philosophy on fulfilling this responsibility is

available without charge, upon request, by calling 1-800-704-6072.

 

QUARTERLY FILING OF PORTFOLIO HOLDINGS
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q.  The Fund's Forms N-Q are available on the SEC's website athttp://www.sec.gov.  The Fund's Forms N-Q may also be reviewed and copied at the SEC's Public Reference Room in Washington DC.  Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

APPROVAL OF INVESTMENT ADVISORY AGREEMENT
At an in-person meeting held on January 18, 2019, the Board of Directors, including a majority of Directors that are not "interested" persons of the Fund(as the term is defined in the 1940 Act), re-approved the Advisory 
Agreement based upon its review of the qualitative and quantitative 
information provided by the Investment Advisor.  The Directors          
considered, among other things, the following information regarding the Investment Advisor: 

 

 

1)  Nature, extent and quality of services provided by the Advisor –

   The Directors reviewed the nature, quality and scope of current  

services provided by the Advisor under the Advisory Agreement.  The Directors also analyzed the experience of the Investment Advisor and capabilities as a portfolio manager, noting that the Advisor has managed separate account portfolio’s successfully with assets far in excess of the Fund’s NAV for decades.  The Advisor’s Form ADV was reviewed as well as internal compliance policies and experience managing other portfolios.  In addition, the portfolio and brokerage transactions of the Fund were reviewed.  Based on this review, the Directors concluded that the range and quality of services to be provided by the Investment Advisor to the Fund were appropriate and to support the selection of the original Investment Advisor.

 

2)    Investment performance – The Directors reviewed the performance of the Fund as compared to market benchmarks for various time periods.  This review focused on investment strategy and long term performance potential.  For 2018 the Fund was down 5.77% versus down 4.39% for the S&P 500 and down 8.97% for the S&P Value index.  In 2017 the Fund was up 23.07% versus the S&P 500 up 21.80%.  The Directors concluded that the performance of the Fund managed by the Investment Advisor, both short term and longer term, was satisfactory.

 

3)    Cost of services to the Fund and profitability of the Advisor – The Directors considered the Fund’s management fee and total expense ratio of the Fund relative to industry averages.  The Directors determined that the Advisor is receiving a fee (0.85%) that is in line with fees charged for other funds and that the Advisor is operating profitably, is viable and should remain an ongoing entity.  The Directors also noted that the Advisor is paying all expenses (except transaction commissions) associated with managing the Fund out of the management fee, which is very advantageous to shareholders versus other funds.

 

 

4)    Economies of Scale – The Directors considered information regarding economies of scale with respect to management of the Fund and noted that the Fund and its shareholders are already experiencing and benefitting from an expense ratio (0.85%) that would be expected from that of funds with significantly larger asset bases.

 

5)    Conclusions – Based on the above review and discussions, the Directors concluded that it is in the best interest of the Fund and the shareholders to approve the Advisory Agreement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Board of Directors Information (Unaudited)

Stock Dividend Fund, Inc.

December 31, 2019

 

The business and affairs of the Fund are managed under the direction of the Fund's Board of Directors.  Information pertaining to the Directors of the Fund are set forth below.  The Fund's Statement of Additional Information includes additional information about the Fund's Directors, and is available without charge, by calling 1-800-704-6072.  Each director may be contacted by 
writing to the director c/o Stock Dividend Fund, Inc, 8150 N. Central Expressway, Suite M1120, Dallas, Texas, 75206.

 

 

INDEPENDENT DIRECTORS

 

Name and Age       Position  Term/ Principal Occupation  Other Public

                             Yrs*  Past five years       Directorships

                                                         Served**

------------------ --------  ----  --------------------- -------------

 

Vicky L. Hubbard    Director  1    Private investor      

Age 62                             since 2000, Tech Co.  

                                   Manager prior      

                                                       

                                                          

Yolawnde F. Malone  Director  1    Pres. Whitford Capital,

Age 56                             Senior Tax Mngr,      

                                   Montgomery Cosia

                                   Greilich LLP prior,  

                                   CPA Family Legacy

                                   Trust prior      

      

 

INTERESTED DIRECTORS

 

Laura S. Adams      Director, 1    Member, Adams          

Age 58              President      Asset Advisors        

                    Secretary     

                    Treasurer    

 

 

 

*All Directors have served since the Fund’s Effective date of registration with SEC, November 29, 2004.

**The number of portfolios in each Fund complex overseen is one.  Each Director oversees two portfolios, one for each complex overseen.

 

This report and the financial statements contained herein are submitted for the general information of shareholders and are not authorized for distribution to prospective investors unless preceded or accompanied by an effective

prospectus. Nothing herein contained is to be considered an offer of sale or solicitation of an offer to buy shares of Stock Dividend Fund, Inc.  Such offering is made only by prospectus, which includes details as to offering

price and material information.

 

 

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of Stock Dividend Fund, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Stock Dividend Fund, Inc. (the “Fund”) as of December 31, 2019, the related statements of operations and changes in net assets for the year ended December 31, 2019, including the related notes, and the financial highlights for the year ended December 31, 2019 (collectively referred to as the “financial statements”).  In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2019 and the results of its operations and its changes in net assets for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures also included confirmation of securities owned as of December 31, 2019 by correspondence with the custodian and others; when replies were not received, we performed other appropriate auditing procedures. We believe that our audit provides a reasonable basis for our opinion.

 

 

/s/ Turner, Stone & Company, L.L.P.

 

 

Dallas, Texas

February 14, 2020

 

We have served as the Fund’s auditor since 2018.