STOCK DIVIDEND FUND, INC.

 

 

SEMI-ANNUAL REPORT

JUNE 30, 2022

 

 

 

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 the first six months of 2022 with a Net Asset Value per

share of $27.92, unchanged from a Net Asset Value per share of $27.92 at the

beginning of the year.

 

For the period December 31, 2021 through June 30, 2022 the Fund's total

return was 0.00% versus the S&P 500 down 19.98% and the iShares Large Cap Value index down 12.45%.

 

In the first half of 2022, large cap value stocks outperformed technology growth stocks which are large components of the S&P 500. We expect continued rotation back into large cap value and dividend paying stocks that are consistent with the strategy of the Fund. 

 

The Fund’s portfolio continues to be mostly weighted toward large companies that on average have very little debt, low pension and post-retirement liabilities, high relative dividend income, strong dividend coverage and stable cash flows. If interest rates stay relatively low as we expect, this should be a rewarding combination as investment allocation decisions will be forced back into this category for income and growth. 

 

Our top holdings and industry group exposures, as of June 30, 2022, are listed below.

 

Regardless of general market volatility in the short term, we are strongly encouraged with the valuation levels, dividend income and appreciation potential of our portfolio relative to general market indices.

 

 

Sincerely,

 

 

 

Steven Adams

Portfolio Manager

 

 

 

 

 

STOCK DIVIDEND FUND, INC.

Top Ten Holdings and Asset Allocation

June 30, 2022

 

 

 

Top Ten Holdings*

(% of Net Assets)

 

Chevron Corp                             5.63%

Universal Corp                            5.46%

AT&T Inc                                 5.41%

The Kraft Heinz Co                       5.32%

Kimberly-Clark Corp                      5.02%

IBM                                      4.90%

AbbVie Inc.                              4.68%

Newmont Corp                             4.56%

Amgen Inc                                4.46%

HP Inc                                   4.34%

                                        ------

                                        49.78%

 

Asset Allocation

(% of Net Assets)

 

Petroleum Refining                                                9.26%

Computer and Office Equipment                                     9.24%

Telephone Communications, Except Radiotelephone                   9.19%

Pharmaceutical Preparations                                       8.19%

Raw Farm Products                                                 5.46%

Canned, Frozen & Preserved Fruit, Veg & Food                      5.32%

Paper Prods                                                       5.02%

National Commercial Banks                                         4.74%

Gold and Silver Ores                                              4.56%

Biolog Prod                                                       4.46%

Life Insurance                                                    4.26%

Cigarettes                                                        4.24%

Engines & Turbines                                                4.08%

Electronic Computers                                              4.07%

TV Stations                                                       3.78%

Semiconductors and Related Devices                                3.65%

Computer Communications Equipment                                 3.07%

Variety Stores                                                    3.03%

Retail Drug Store                                                 2.94%

Other Assets, Less Liabilities, Net                               1.44%

                                                                -------

                                                                100.00%

 

 

 

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

 

 


STOCK DIVIDEND FUND, INC.

EXPENSES

JUNE 30, 2022

 

As a shareholder of the Fund you incur ongoing costs including

management fees.  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 December 31, 2021 to June 30, 2022.

 

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      December 31, 2021

           December 31, 2021       June 30, 2022      to  June 30, 2022

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

 

Actual              $  1,000        $   1,000.00             $   4.22

 

Hypothetical**      $  1,000          $ 1,041.50             $   4.30

 

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

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

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

** Hypothetical return assumes 5% return before expenses.

 

 

 

STOCK DIVIDEND FUND, INC.

STATEMENTS OF ASSETS AND LIABILITIES (Unaudited)

JUNE 30, 2022

 

 

ASSETS

   Investment securities, at

          fair value(cost $25,462,287)       $ 31,857,718

   Cash                                           432,675

   Dividends Earned                                64,671

   Interest receivable                                  9

                                              -----------

              Total assets                     32,355,073

                                              -----------

 

LABILITIES

   Advisory fees payable                           23,641

                                              -----------

              Total liabilities                    23,641

                                              -----------

 

NET ASSETS -

 (Equivalent to $27.92 per

  share based on 1,158,072 shares

   of common stock issued and outstanding;

   100,000,000 shares authorized,

   $0.001 par value                          $ 32,331,432

                             

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

 

NET ASSETS CONSIST OF:

  Common stock                               $      1,158

  Paid-in capital                              23,934,163

  Net unrealized appreciation

   of investments                               6,395,431

  Undistributed net investment income             479,899

  Undistributed net realized gain on

   Investments                                  1,520,781

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

Net assets                                   $ 32,331,432  

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

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to these financial statements.

 

STOCK DIVIDEND FUND, INC.

SCHEDULE OF INVESTMENTS (Unaudited)

JUNE 30, 2022

 

 

DESCRIPTION                                 SHARES      MARKET VALUE

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

COMMON STOCKS – 98.56%

                                                                   

Petroleum Refining-9.26%                                           

   Chevron Corp.                            12,563        $ 1,818,871

   Valero Energy Corp                       11,028          1,172,056

                                                            ---------

                                                            2,990,927

 

Computer and Office Equipment-9.24%

   Hewlett Packard Inc.                     42,844          1,404,426

   International Business Machines Corp.    11,216          1,583.587

                                                            ---------

                                                            2,988,013

 

Telephone Communications, Except

Radiotelephone-9.19%

      AT&T                                  83,429          1,748,672

      Verizon                               24,089          1,222,517

                                                            ---------

                                                            2,971,189

 

Pharmaceutical Preps-8.19%

   AbbVie Inc.                               9,869          1,511,536

   Pfizer Inc.                              21,646          1,134,900

                                                            ---------

                                                            2,646,436

 

Raw Farm Food-5.46%

   Universal Corp.                          29,174          1,765,027

 

Canned, Frozen & Preserved Fruit, Veg-5.32%

   Kraft Heinz Company                      45,081          1,719,389

 

Paper Prods-5.02%

   Kimberly-Clark Corp                      12,010          1,623,152

 

National Commercial Banks-4.74%

   Citigroup Inc.                           21,792          1,002,214

   Wells Fargo                              13,500            528,795

                                                            ---------

                                                            1,531,009

 

Gold and Silver Ores-4.56%

   Newmont Corp.                            24,690          1,473,252

 

Biolog Prod-4.46%

  Amgen Inc.                                 5,921          1,440,579

 

Life Insurance-4.26%

  Prudential Financial Inc.                 14,395          1,377,314

- Continued -

 

STOCK DIVIDEND FUND, INC.

SCHEDULE OF INVESTMENTS, continued

(Unaudited)

JUNE 30, 2022

 

DESCRIPTION                                 SHARES      MARKET VALUE

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

Cigarettes-4.24%

  Altria Group                              32,853          1,372,270

 

Engines and Turbines-4.08%

   Cummins Inc.                              6,812          1,318,326  

 

Electronic Computers-4.07%

   Apple Inc.                                9,633          1,317,024

 

TV Stations-3.78%

   Paramount Global                         49,496          1,221,561

 

Semi-Conductors and Related Devices-3.65%

   Intel Corp                               31,526          1,179,388

 

Computer Communications Equipment-3.07%

   Cisco Systems Inc.                       23,296            993,341

 

Variety Stores-3.03%

   Walmart                                   8,065            980,543 

 

Retail Drug Store-2.94%

  Walgreens Boots Alliance                  25,039            948,978

                                                           ----------

                                  

   Total common stocks (cost $25,462,287)               $  31,857,718

                                                           ----------

 

 

SHORT-TERM INVESTMENTS – 1.30%  

   Schwab Money Market Fund (Single Class Fund)      

              -current interest at 0.15%  432,675     $      432,675

                                                            ---------

  

   Total short-term investments (cost $  432,675)             432,675

                                                            ---------

 

Total investment securities   99.87% (cost $25,894,962)   32,290,393

 

Other assets less liabilities – 0.13%                          41,039

                                                             --------

 

Net assets - 100.00%                                   $   32,331,432

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

 

 

See accompanying notes to these financial statements.

 

STOCK DIVIDEND FUND, INC.

STATEMENT OF OPERATIONS (Unaudited)

FOR THE SIX MONTHS ENDED JUNE 30, 2022

 

 

 

INVESTMENT INCOME:

   Dividends                                             $    625,235

   Interest                                                        25

   Accrued Interest                                                 9

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

          Total investment income                             625,269

 

EXPENSES -

   Advisory fees                                              145,040

   Misc expenses                                                  330

                                                             --------

                                                              145,370

 

 

          Net investment income                               479,899

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

 

GAINS ON INVESTMENTS -

   Net realized gain on investments                         1,520,781  

   Net change in unrealized appreciation of securities     (1,967,801)

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

         Net realized and unrealized gain on investments     (447,020)

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

  

   Net increase in net assets resulting from operations  $     32,879

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to these financial statements.

 

 

STOCK DIVIDEND FUND, INC.

STATEMENT OF CHANGES IN NET ASSETS (Unaudited)

 

 

                                       Six Months Ended      Year Ended

                                          June 30, 2022   Dec. 31, 2021

 

INCREASE IN NET ASSETS FROM OPERATIONS:

   Net investment income                    $   479,899    $    839,093

   Net realized gain on investments           1,520,781       5,022,741

   Net change in unrealized appreciation 

   of securities                             (1,967,801)        528,732

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

      Net increase(decrease) in net assets

      resulting from operations                  32,879       6,390,566

         

 

DISTRIBUTIONS TO SHAREHOLDERS FROM                                

   Net investment income                              0        (839,093)

   Net realized  gains                                0      (5,022,741)

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

         Total Distributions                          0      (5,861,834)

 

CAPITAL SHARE TRANSACTIONS-NET                 (738,947)      4,026,536

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

 

TOTAL INCREASE(DECREASE) IN NET ASSETS         (706,068)       4,555,268

 

NET ASSETS, beginning of period              33,037,500      28,482,232 

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

 

NET ASSETS, end of period                    32,331,432    $ 33,037,500

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to these financial statements.

 

STOCK DIVIDEND FUND, INC.

FINANCIAL HIGHLIGHTS (Unaudited)

 

PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH

PERIOD ENDING:

                       PERIOD   YEAR      YEAR      YEAR      YEAR     YEAR 

                        ENDED   ENDED     ENDED     ENDED     ENDED    ENDED

                      6/30/22   2021      2020      2019      2018      2017     

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

Net asset value,

  beginning of period  $27.92   $27.67    $28.98    $26.01   $29.93    $26.61

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

Income from investment

operations:

  Net investment income  0.41     0.86      0.83      0.76     0.71      0.70

  Net realized and

  unrealized gains

  (losses)on investments(0.41)    5.41     (1.28)     3.46    (2.51)     5.44

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

Total income(loss)from                                     

  investment operations 0.00     6.27     (0.45)     4.22    (1.80)     6.14

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

Less distributions from:

  Net investment income  0.00    (0.86)    (0.83)    (0.76)   (0.71)    (0.75)

  Net realized gains     0.00    (5.16)    (0.03)    (0.49)   (1.41)    (2.07)

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

    Total distributions  0.00    (6.02)    (0.86)    (1.25)   (2.12)    (2.82)

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

Net asset value,

  end of period        $27.92   $27.92    $27.67    $28.98    $26.01    $29.93

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

 

Total Return             0.00%   22.78%    (1.51)%   16.92%   (5.77)%    23.07%

 

Net assets, end of            

   period(in 1000's)   $32,331  $33,037    $28,482  $33,105   $28,273   $32,385

 

Ratio of expenses to

   average net

   asset(a)              0.85%    0.85%     0.87%     0.85     0.86%      0.85%

 

Ratio of net investment

   income to average net

   assets (annualized)   2.79%    2.63%     3.15%    2.74%     2.24%      2.37%

 

Portfolio turnover

   rate (annualized)    28.29%    38.45%   34.06%   14.41%    28.64%     41.45%

 

 

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

asset value (NAV).

 

 

 

See accompanying notes to 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

 

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.  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 June

30, 2022, 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 July 16, 2022, the date in which these financials were available to be issued.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 June 30, 2022:

 

                                    Investments          Other

                                    in                   Financial

      Level                         Securities           Instruments *

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

      Level 1:

         Common Stock               $31,857,718          $          0

         Short term investments         432,675                     0

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

            Total Level 1:           32,290,393                     0

      Level 2                                 0                     0

      Level 3                                 0                     0

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

      Total                         $32,290,393          $          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 June 30, 2022, the Fund did not own any other financial instruments.

   

 

 

 

STOCK DIVIDEND FUND, INC.

NOTES TO FINANCIAL STATEMENTS

 

 

4. CAPITAL SHARE TRANSACTIONS

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

stock were as follows:

 

 

                          Period Ended           Year Ended

                         June 30, 2022       December 31, 2021

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

                       Shares       Amount     Shares       Amount

Shares sold            2,743    $   80,213    41,349    $ 1,228,200

Shares issued in

  reinvestment of

  dividends                0             0   210,857      5,861,834

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

                       2,743        80,213   252,206    $ 7,090,034

 

Shares redeemed      (28,102)     (819,382)  (98,148)    (3,063,535)

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

Net increase

      (decrease)    (25,359)     (739,169)  154,058      4,026,499

 

Beginning of year  1,183,427    24,674,179 1,029,369    $20,647,680

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

End of year        1,158,068    23,935,010 1,183,427    $26,674,179

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

 

 

5.  INVESTMENT TRANSACTIONS

The aggregate cost of purchases and proceeds from sales of investment

securities, excluding short-term investments, aggregated $4,994,529

and $4,744,442, respectively, for the Period ended June 30, 2022.

The aggregate cost of investment securities, excluding short term investments, for federal income tax purposes was $25,462,287 as of June 30, 2022.  There were no differences between the financial reporting basis and the income tax basis in the cost or net unrealized appreciation (depreciation) of the Fund’s investments as of June 30, 2022.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCK DIVIDEND FUND, INC.

NOTES TO FINANCIAL STATEMENTS

 

As of December 31, 2021 and the Period ended June 30, 2022, the aggregate unrealized appreciation and depreciation of investment securities was as follows:

 

Description                       June 30, 2022  December 31,2021

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

Unrealized appreciation           $   7,479,721     $   9,130,419

Unrealized depreciation              (1,084,290)         (767,187)

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

Net unrealized

   appreciation                   $   6,395,431     $   8,363,232

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

 

6. DISTRIBUTION TO SHAREHOLDERS

No distributions have been made in 2022 as of June 30, 2022. In 2021 total distributions of $5,861,834, or $6.0272 per share, were paid representing $0.8628 per share qualified dividends ($839,093), $0.8843 per share Short Term capital gains ($860,030), and $4.280 per share Long Term capital gains ($4,162,710). 

 

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. Laura S. Adams is a member of the Advisor and is also

an officer, director and shareholder of the Fund.  Under the terms

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 the six months ended June 30, 2022, as computed pursuant to the investment advisory agreement, totaled $145,040, of which $23,641 was payable on June 30, 2022.

 

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 it 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 Period ended June 30, 2022, there were no redemption fees received by the Fund.

 

 

9.   ACCOUNTING FOR UNCERTAIN TAX POSITIONS 

As of December 31, 2021, open Federal tax years, subject to examination, include the tax years ended December 31, 2019 through December 31, 2021.  The Fund has no examination in progress.

 

 

ADDITIONAL INFORMATION

 

PROXY VOTING INFORMATION

Adams Asset Advisors, LLC, the Fund’s Advisor, is responsible for exercising the

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

description of our policies and procedures on fulfilling this responsibility is

available without charge, upon request, by calling 1-800-704-6072.  Information about how each Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 may be obtained (1) without charge, upon request, by calling 800-704-6072 and (2) on the SEC’s website at http://sec.gov.

 

 

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-PORT.  The Fund's Forms N-PORT are available on the SEC's website at http://www.sec.gov.  The Fund's Forms N-PORT 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.

 

LIQUIDITY RISK MANAGEMENT PROGRAM

The Fund has adopted and implemented a written liquidity risk management program as required by Rule 22e-4 (the “Liquidity Rule”) under the Investment Company Act. The program is reasonably designed to assess and manage the Fund’s liquidity risk, taking into consideration, among other factors, the Fund’s investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions; its short and long-term cash flow projections; and its cash holdings.

 

During the fiscal year ended December 31, 2021, the Board of Directors reviewed the Fund’s investments and determined that the Fund held adequate levels of cash and highly liquid investments to meet shareholder redemption activities in accordance with applicable requirements. Accordingly, the Board concluded that (i) the Fund’s liquidity risk management program is reasonably designed to prevent violations of the Liquidity Rule and (ii) the Fund’s liquidity risk management program has been effectively implemented.

 
 
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
At an in-person meeting held on January 21, 2022, 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 the five years ending 2021 the Fund was up 10.25% versus up 18.45% for the S&P 500 Index and up 11.14% for the iShares Large Cap Value index.  For the ten years ending 2021 the Fund was up 10.12% versus up 16.51% for the S&P 500 Index and up 12.04% for the iShares Large Cap Value Index.  It was noted that growth oriented strategies with high p/e technology weightings like the S&P 500 have outperformed value oriented strategies for several years.  The Directors concluded that the performance of the Fund managed by the Investment Advisor, both short term and longer term, was satisfactory and in-line with similar Value oriented Funds.

 

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

Stock Dividend Fund, Inc.

June 30, 2022

 

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 Yr Admin Support Staff

Age 64                             Prince of Peace,

                                   Private investor      

                                   since 2000, Tech Co.                                                      

                                   Manager prior      

                                                      

                                                           

Jennifer T Lapeyre  Director  1 Yr Retired in 2019, prior

                                   Account Rep for non-profits

Age 58                             at Auction Source, LP

                                   (2010-2019) Dallas, Texas

 

 

 

INTERESTED DIRECTORS

 

Laura S. Adams      Director, 1 Yr President, Adams

Age 60              President      Asset Advisors  

                    Secretary     

                    Treasurer    

 

 

*Vicky L. Hubbard and Laura S. Adams have served since the Fund’s Effective date of registration with SEC, November 29, 2004.  Jennifer T. Lapeyre has served since February 1, 2022.

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

 

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.