Delaware Dividend Income Fund

Objective

Delaware Dividend Income Fund seeks to provide high current income and an investment that has the potential for capital appreciation.

Strategy

The Fund invests primarily in income generating securities (debt and equity), which may include equity securities of large, well-established companies, and debt securities, including high yield, high-risk corporate bonds, investment grade fixed income securities, and U.S. government securities.

Fund information
Inception date12/02/1996
Dividends paid*Monthly
Capital gains paid*December

*If any.

Fund identifiers
NASDAQDDIAX
CUSIP24610B107
Investment minimums
Initial investment$1,000
Subsequent Investments$100
Systematic withdrawal balance$5,000
Account features
CheckwritingNo
Payroll DeductionYes
IRAsYes

The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.

Total returns may reflect waivers and/or expense reimbursements by the manager and/or distributor for some or all of the periods shown. Performance would have been lower without such waivers and reimbursements.

Average annual total return as of month-end (03/31/2014)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.61%13.69%10.41%18.03%6.55%8.40%12/02/1996
Max offer pricen/a7.10%8.27%16.63%5.92%8.03%
S&P 500 Index1.81%21.86%14.66%21.16%7.42%n/a
Average annual total return as of quarter-end (03/31/2014)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.61%2.61%13.69%10.41%18.03%6.55%8.40%12/02/1996
Max offer price-3.29%-3.29%7.10%8.27%16.63%5.92%8.03%
S&P 500 Index1.81%1.81%21.86%14.66%21.16%7.42%n/a

Returns for less than one year are not annualized.

Class A shares have a maximum up-front sales charge of 5.75% and are subject to an annual distribution fee.

Expense ratio
Gross1.12%
Net1.12%
Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20142.61%n/an/an/an/a
20138.03%1.34%3.15%5.99%19.70%
20127.52%-0.57%4.24%1.98%13.65%
20115.86%0.39%-11.31%8.31%2.08%
20104.04%-5.76%8.65%6.55%13.50%
2009-3.66%15.58%14.72%6.81%36.43%
2008-6.36%-3.02%-8.30%-18.93%-32.48%
20071.75%1.83%-1.49%-5.88%-3.93%
20065.72%0.17%5.95%6.64%19.65%
2005-1.47%2.32%2.20%-0.35%2.66%
20042.94%-1.30%2.24%6.30%10.43%
Portfolio characteristics - as of 03/31/2014
Share assets$318.5 million
Number of holdings473
Market cap (median)$8.62 billion
Market cap (weighted average)$72.49 billion
Portfolio turnover (last fiscal year)51%
Beta (relative to S&P 500 Index) (view definition)0.68
Annualized standard deviation, 3 years (view definition)8.82
SEC 30-day yield with waiver (view definition)1.92%
SEC 30-day yield without waiver (view definition)1.92%
Portfolio composition as of 03/31/2014Total may not equal 100% due to rounding.
Large cap value54.4%
High yield bonds16.7%
Convertible securities13.2%
Real estate7.7%
Cash and cash equivalents5.1%
Other2.9%
Top 10 holdings as of 03/31/2014
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Edison International1.5%
Quest Diagnostics Inc.1.5%
Baxter International Inc.1.5%
AT&T Inc.1.5%
Bank of New York Mellon Corp.1.4%
ConocoPhillips1.4%
Johnson & Johnson1.4%
Halliburton Co.1.4%
Intel Corp.1.4%
Xerox Corp.1.4%
Total % Portfolio in Top 10 holdings14.4%

Holdings are as of the date indicated and subject to change.

Distribution history - annual distributions (Class A)
Distributions ($ per share)
YearCapital gainsDividends
20140.0000.109
20130.0000.279
20120.0000.356
20110.0000.352
20100.0000.370
20090.0000.400
20080.0000.506
20070.3360.473
20060.0610.414
20050.0660.436
20040.0810.332
Bob Zenouzi

Bob Zenouzi 

Chief Investment Officer — Real Estate Securities and Income Solutions (RESIS)

Start date on the Fund: May 2006

(View bio)


Damon Andres

Damon Andres, CFA

Senior Portfolio Manager

Start date on the Fund: December 1996

(View bio)


Ty Nutt

Ty Nutt  

Senior Portfolio Manager, Team Leader

Start date on the Fund: March 2005

(View bio)


Anthony Lombardi

Anthony A. Lombardi, CFA

Senior Portfolio Manager

Start date on the Fund: March 2005

(View bio)


Bob Vogel

Robert A. Vogel Jr., CFA

Senior Portfolio Manager

Start date on the Fund: March 2005

(View bio)


Nik Lalvani

Nikhil G. Lalvani, CFA

Senior Portfolio Manager

Start date on the Fund: October 2006

(View bio)


Kristen Bartholdson

Kristen E. Bartholdson 

Senior Portfolio Manager

Start date on the Fund: December 2008

(View bio)


Wayne Anglace

Wayne A. Anglace, CFA

Senior Portfolio Manager

Start date on the Fund: March 2010

(View bio)


Ned Gray

Ned Gray, CFA

Chief Investment Officer — Global and International Value Equity

Start date on the Fund: March 2011

(View bio)


Thomas Chow

Thomas H. Chow, CFA

Chief Investment Officer — Corporate Credit

Start date on the Fund: December 2012

(View bio)


Paul Matlack

Paul Matlack, CFA

Senior Portfolio Manager, Fixed Income Strategist

Start date on the Fund: December 2012

(View bio)


Craig Dembeck

Craig C. Dembek, CFA

Co-Head of Credit Research, Senior Research Analyst

Start date on the Fund: December 2012

(View bio)


John McCarthy

John P. McCarthy, CFA

Co-Head of Credit Research, Senior Research Analyst

Start date on the Fund: December 2012

(View bio)


You may qualify for sales-charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Delaware Investments® Funds. More information about these and other discounts is available from your financial advisor, in the Fund's prospectus under the section entitled "About your account," and in the Fund's statement of additional information (SAI) under the section entitled "Purchasing Shares."

The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.

Shareholder fees
Maximum sales charge (load) imposed on purchases as a percentage of offering price5.75%
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lowernone
Annual fund operating expenses
Management fees0.65%
Distribution and service (12b-1) fees0.25%
Other expenses0.22%
Total annual fund operating expenses1.12%
Fee waivers and expense reimbursementsnone
Total annual fund operating expenses after fee waivers and expense reimbursements1.12%

View printable commentary E-mail this page

This commentary is currently not available. Please check back later.

Delaware Dividend Income Fund Quarterly commentary March 31, 2014 Class A (DDIAX)

Within the Fund

For the first quarter of 2014, Delaware Dividend Income Fund (Class A shares at net asset value) posted a positive return and outperformed its benchmark, the S&P 500® Index.

Within the large-cap value equity portion of the Fund, stock selection results were modestly positive and offset by sector allocation decisions. The largest drag on relative returns came in the information technology and financial sectors, with stock selection being the main source of negative attribution in each. Xerox and Motorola Solutions were notable laggards, falling 6.6% and 4.3%, respectively. Xerox reported lower revenue for the fourth quarter and reaffirmed its guidance for 2014. Several downgrades from Wall Street analysts followed. Motorola Solutions reported higher sales and earnings for the fourth quarter, but took down revenue guidance for the current quarter and year. The team believes the challenges facing both Xerox and Motorola Solutions are temporary. In financials, property/casualty insurer Travelers was the weakest holding with a decline of 5.5%. While the company reported record earnings per share last quarter, many investors have become more concerned about a weaker insurance pricing environment following a period of relatively low catastrophic losses for the industry.

The largest contribution to performance within the Fund’s large-cap value portion came from investments in energy and industrials. Energy services provider Halliburton was the top holding with a gain of 16.4%. Stronger revenue growth in its international operations helped offset more modest growth in the United States. In industrials, defense contractors Raytheon and Northrop Grumman led the way, up 9.6% and 8.2%, respectively. Despite downward pressure on U.S. Defense Department spending, these companies have held up well by improving operating efficiency and expanding their non-U.S. and commercial operations.

Within the equity real estate investment trust (REIT) portion of the Fund, stock selection within the shopping centers, office, and apartments sectors had a negative effect. In addition, a moderate overweight allocation to the underperforming shopping centers sector detracted from performance. Fundamentals in the sector, including overall occupancy, continued to recover and have reached near-peak levels. We were especially encouraged by the increase in occupancy for small-shop space. On a cautionary note, we see that many shopping center companies are hesitant to increase development spending, concerned that they overspent in the last cycle.

Stock selection in the mixed, healthcare, and lodging REIT sectors aided Fund performance. Duke Realty in the mixed sector was a notable contributor, gaining more than 10%. Duke has transformed itself into a predominantly industrial company by selling its suburban office assets. In addition, it added medical office buildings several years ago. As a result of the Affordable Care Act, this asset class is in demand and Duke, as a low-cost provider, has accumulated notable gains in a short period of time.

Within the Fund’s high yield bond portion, the top sector contributors were basic industry, healthcare, and insurance. Top individual contributors included Algeco Scotsman (modular trailer leasing), Par Pharmaceuticals (generic drug manufacturing), and American International Group (insurance).

Sectors that detracted from performance were energy, telecommunications, and utilities. Bottom performers at the individual security level included Quiksilver (outdoor sports equipment), GenOn (utility), and Akorn (ophthalmic pharmaceuticals). GenOn lagged in line with the utility sector, Quiksilver underperformed on modestly weaker-than-expected first quarter earnings, and Akorn declined on softer full year 2014 guidance from the company.

Outlook

Moving into the second quarter of 2014, several notable themes, possibilities, and developments bear monitoring. These include the following:

  • The cyclical bull market is now more than five years old, having begun in March 2009. During this period, the broad market S&P 500 Index has amassed a cumulative total return of 205% (source: Bloomberg). Granted, low interest rates (low inflation, really), are supportive of higher price multiples. But, in the context of relatively soft underlying fundamentals for both the stock market and economy, current valuation appears stretched, in our view. We wonder if an uptick in inflation could be coming. To be sure, there are mixed signals. Inflationary developments such as an uptick in labor costs in the U.S., China, and Japan; rising food prices; and higher utility bills are being offset by a variety of things, including weakness in emerging market currencies, slower emerging market growth, falling industrial commodity prices, and a decline in private sector lending in the euro zone.
  • Finding undervalued stocks to replace those nearing their price targets is a priority for us. We find ourselves in a bottom-up (stock-by-stock) search because there are no compellingly inexpensive sectors. We’re seeing some value in parts of the technology sector and are working on specific ideas in consumer discretionary and industrials. Despite our recent transaction in financials, we’re doing work in that sector as well. Given the caution we’re feeling about the stock market’s level and valuation, we remain focused on higher-quality attributes such as balance-sheet strength, cash-flow consistency, and earnings predictability.
  • The REIT sector is once again in favor as global markets consolidate large gains realized in 2013. Real estate is a long-duration asset, and real estate equities are the vehicle that allows public investors to participate in the real estate market. Like any sector, REITs can be volatile. We believe our process over the past 20 years has enabled us to take advantage of both peaks and valleys. To those who believe that REITs can be excessively volatile, our response is twofold: First, REITs have outperformed private real estate over the past 30 years, even though private, illiquid investments theoretically should provide a return premium. Second, we believe investors in REITs should take the long view. Because real estate cash flows are contractual, they tend to be less volatile. We therefore believe that REIT volatility should subside over the long term (source: Bloomberg).
  • With a benign domestic macroeconomic environment, stable corporate credit metrics, and sustained demand for high yield loans and bonds, conditions have remained supportive for the leveraged credit sector. However, while credit trends remain benign, the continued compression of high yield credit spreads diminishes the market’s ability to absorb future interest rate increases. While we believe policy rates are unlikely to move anytime soon given substantial labor market slack, market rates are under no such constraint and could certainly shift higher in the event of unexpectedly strong economic growth. Given a stable rate backdrop, we believe the tight spreads prevailing in the high yield bond market and high dollar price of the loan market imply that returns going forward could consist largely of income.

In light of these circumstances, we believe there is a strong argument for seeking companies that, in our view, have several of the following attributes: (1) appear undervalued, (2) have strong cash flows, (3) maintain manageable debt levels, (4) operate diversified businesses, and (5) deliver consistent dividends.

[12474]

The views expressed represent the Manager's assessment of the Fund and market environment as of the date indicated, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Information is as of the date indicated and subject to change.

Document must be used in its entirety.

Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by clicking the prospectus link located in the right-hand sidebar or calling 877 693-3546. Investors should read the prospectus and the summary prospectus carefully before investing.

Investing involves risk, including the possible loss of principal.

The Fund may invest up to 45% of its net assets in high yield, higher-risk corporate bonds.

Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.

The Fund may also be subject to prepayment risk, the risk that the principal of a fixed income security that is held by the Fund may be prepaid prior to maturity, potentially forcing the Fund to reinvest that money at a lower interest rate.

High yielding, noninvestment grade bonds (junk bonds) involve higher risk than investment grade bonds.

International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.

Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 04/22/2014)

Class APriceNet changeYTD
NAV$13.23-0.013.02%
Max offer price$14.04n/an/a

Total net assets (as of 03/31/2014)

$683.3 million all share classes

Overall Morningstar RatingTM

Load waived

With load

Class A shares (as of 03/31/2014)

Load waivedWith loadNo. of funds
Overall43742
3 Yrs43742
5 Yrs54666
10 Yrs33437
Morningstar categoryModerate Allocation

(View Morningstar disclosure)

Lipper ranking (as of 03/31/2014)

YTD ranking74 / 259
1 year48 / 220
3 years15 / 142
5 years9 / 94
10 years16 / 48
Lipper classificationFlexible Portfolio Funds

(View Lipper disclosure)

Literature

Prospectuses and reports

Benchmark, peer group

S&P 500® Index (view)

Lipper Flexible Portfolio Funds Average (view)

Additional information