UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-21576
Stock Dividend Fund, Inc.
(Exact name of registrant as specified in charter)
8150 N. Central Expressway #M1120 Dallas, Texas 75206
(Address of principal executive offices)
Laura S. Adams
8150 N. Central Expressway #M1120 Dallas, Texas 75206
(Name and address of agent for service)
Registrant?s telephone number, including area code: 800-704-6072
Date of fiscal year end: December 31
Date of Reporting Period: December 31, 2021
Item 1. Report to Shareholders.
STOCK DIVIDEND FUND, INC.
ANNUAL REPORT
DECEMBER 31, 2021
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 2021 with a Net Asset Value per share of $27.92, after paying an
income dividend of $1.7471 per share and long term capital gain of $4.2801 per
share on December 27, 2021, which is up from a Net Asset Value per share of
$27.67 at the beginning of the year.
For the period December 31, 2020 through December 31, 2021 the total
return of the Fund was up 22.78% versus the S&P 500 up 28.68% and the iShares
Large Cap Value etf which was up 26.71%. The S&P 500, meaningfully driven by
large cap technology stocks with high valuation levels and virtually no dividend
income, continued to outperformed value oriented portfolios. We are confident
that money will flow back toward value and income and our portfolio will
outperform.
The turnover of the Fund in 2021 was a little higher than average at 38% as we
weighted toward our most attractive positions and took advantage of realizing
capital gains before potential tax law changes in 2022.
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 2022 with a meaningfully above market internal portfolio
dividend yield, companies with relatively low debt levels on average, strong
cash flows and 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, 2021, are
listed on the following page.
We look forward to excellent performance in 2022.
Sincerely,
Steven Adams
Portfolio Manager
STOCK DIVIDEND FUND, INC.
Top Ten Holdings and Asset Allocation
December 31, 2021
Top Ten Holdings*
(% of Net Assets)
Apple Inc. 5.18%
Chevron Corp. 5.09%
HP Inc. 4.89%
Universal Corp 4.85%
Prudential Financial Inc 4.72%
Altria Group Inc 4.71%
Newmont Corp 4.63%
IBM 4.54%
Kimberly-Clark Corp 4.47%
The Kraft Heinz Co 4.45%
------
47.53%
Asset Allocation
(% of Net Assets)
Petroleum Refining 11.10%
Computer and Office Equipment 9.43%
Pharmaceutical Preps 7.91%
Telephone Communications, Except Radiotelephone 7.80%
Electronic Computers 5.18%
Raw Farm Food 4.85%
Life Insurance 4.72%
Cigarettes 4.71%
Gold and Silver Ores 4.63%
Surgical and Medical Instruments and Apparatus 3.62%
Paper Prods 4.47%
Canned, Frozen & Preserved Fruit, Veg 4.45%
Semi Conductors and Related Devices 4.24%
Drug Store 4.05%
Biolog Prod 4.03%
Engines and Turbines 3.82%
TV Stations 3.70%
Variety Stores 3.53%
National Commercial Banks 1.96%
Other Assets, Less Liabilities, Net 1.80%
-------
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 Year End Year End
2017 2018 2019 2020 2021
Stock Dividend ------- ------- -------- -------- --------
Fund $263,841 $248,617 $288,946 $284,467 $349,269
S&P 500 Index $289,150 $276,456 $364,369 $431,376 $555,095
STOCK DIVIDEND FUND, INC.
PERFORMANCE SUMMARY (continued)
$570,000|
$560,000|
$550,000| *
$540,000|
$530,000|
$520,000|
$510,000|
$500,000|
$490,000|
$480,000|
$470,000|
$460,000|
$450,000|
$440,000|
$430,000| *
$420,000|
$410,000|
$400,000|
$390,000|
$380,000|
$370,000|
$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| *
________________________________________________________________________
04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
#=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 Annual Annual Average
Return Return Return Annual Return
2019 2020 2021 5 Year 10 Year
Stock Dividend ------ ------ ------ ------ ------
Fund 16.22% (1.51)% 22.78% 10.25% 10.12%
S&P 500 Index 31.48% 18.39% 28.68% 18.45% 16.51%
STOCK DIVIDEND FUND, INC.
EXPENSES
DECEMBER 31, 2021
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, 2021 to December 31, 2021.
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, 2021
June 30, 2021 December 31, 2021 to December 31, 2021
----------------- ----------------- ---------------------
Actual $ 1,000.00 $ 1,039.10 $ 4.37
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, 2021
ASSETS
Investment securities, at fair
value(cost $24,082,998) $ 32,446,230
Cash 547,763
Dividends receivable 66,230
-----------
Total assets 33,060,223
-----------
LIABILITIES
Advisory fees payable 22,723
-----------
Total liabilities 22,723
-----------
NET ASSETS -
Equivalent to $27.92 per
share based on 1,183,427 shares
of common stock issued and outstanding;
100,000,000 shares authorized,
$0.001 par value $ 33,037,500
============
NET ASSETS CONSIST OF:
Common stock $ 1,183
Paid-in capital 24,673,085
Net unrealized appreciation 8,363,232
------------
Net assets $ 33,037,500
============
Net asset value per share $ 27.92
The accompanying notes are an integral part of these financial statements
STOCK DIVIDEND FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2021
DESCRIPTION SHARES MARKET VALUE
----------- ------ -------
COMMON STOCKS ? 98.20%
Petroleum Refining-11.10%
Chevron Corp. 14,330 1,681,626
Phillips 66 8,432 610,983
Valero Energy Corp 18,302 $ 1,374,663
---------
3,667,272
Computer and Office Equipment-9.43%
Hewlett Packard Inc. 42,844 1,613,933
International Business Machines Corp. 11,216 1,499,131
---------
3,113,064
Pharmaceutical Preps-7.91%
AbbVie Inc. 9,869 1,336,263
Pfizer Inc. 21,646 1,278,196
---------
2,614,459
Telephone Communications, Except
Radiotelephone-7.80%
AT&T 53,883 1,325,522
Verizon 24,089 1,251,664
---------
2,577,186
Electronic Computers-5.18%
Apple Inc. 9,633 1,710,532
Raw Farm Food-4.85%
Universal Corp. 29,174 1,602,236
Life Insurance-4.72%
Prudential Financial, Inc. 14,395 1,558,115
Cigarettes-4.71%
Altria Group, Inc. 32,853 1,556,904
Gold and Silver Ores-4.63%
Newmont Corp. 24,690 1,531,274
Surgical & Medical Instruments & Apparatus-3.62%
3M Co. 6,725 1,194,562
Paper Prods-4.47%
Kimberly-Clark Corp 10,340 1,477,793
The accompanying notes are an integral part of these financial statements
- Continued ?
STOCK DIVIDEND FUND, INC.
SCHEDULE OF INVESTMENTS, continued
DECEMBER 31, 2021
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
Canned, Frozen & Preserved Fruit, Veg-4.45%
The Kraft Heinz Company 40,930 1,469,387
Semi-Conductors and Related Devices-4.24%
Intel Corp 27,218 1,401,727
Drug Store-4.05%
CVS Health Corp 12,983 1,339,326
Biolog Prod-4.03%
Amgen Inc. 5,921 1,332,047
Engines and Turbines-3.82%
Cummins Inc. 5,787 1,262,376
TV Stations-3.70%
ViacomCBS Inc. 40,534 1,223,316
Variety Stores-3.53%
Walmart 8,065 1,166,925
National Commercial Banks-1.96%
Wells Fargo 13,500 647,730
----------
Total common stocks (cost $24,082,998) $ 32,446,231
----------
SHORT-TERM INVESTMENTS ? 0.02%
Schwab Money Market Fund (Single Class Fund)
-current interest at 0.01% 547,763 $ 547,763
--------
Total short-term investments (cost $ 547,763) 547,763
--------
Total investment securities ? 99.87% (cost $24,630,718) 32,993,994
Other assets less liabilities ? 0.13% 43,506
--------
Net assets - 100.00% $ 33,037,500
============
The accompanying notes are an integral part of these financial statements
STOCK DIVIDEND FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2021
INVESTMENT INCOME
Dividends (net of adr withholding) $ 1,112,050
Interest 59
------------
Total investment income 1,112,109
------------
EXPENSES -
Advisory fees 272,551
Wire Fees 465
--------
Total Expenses 273,016
--------
Net investment income 839,093
------------
GAIN(LOSS)ON INVESTMENTS -
Net realized gain on investments 5,022,741
Net decrease in unrealized appreciation 528,732
of investments ------------
Net realized gain
on investments 5,551,473
------------
Net increase
in net assets resulting from operations $ 6,390,566
============
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, 2021 Dec. 31, 2020
INCREASE(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 839,093 $ 831,222
Net realized gain (loss)on investments 5,022,741 29,526
Unrealized appreciation(depreciation)
of investments 528,732 (1,970,176)
----------- -----------
Net increase (decrease) in net assets
resulting from operations 6,390,566 (1,109,428)
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (839,093) (831,222)
Realized gains (5,022,741) (29,526)
----------- ------------
Total Distributions (5,861,834) (860,748)
CAPITAL SHARE TRANSACTIONS-NET 4,026,536 (2,652,081)
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 4,555,268 (4,622,257)
NET ASSETS, beginning of year 28,482,232 33,104,489
----------- ------------
NET ASSETS, end of year (includes $ 33,037,500 $ 28,482,232
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
2021 2020 2019 2018 2017
----- ------ ------ ------ ------
Net asset value,
beginning of year $27.67 $28.98 $26.01 $29.93 $26.61
------ ------ ------ ------ ------
Income (loss)from investment
operations:
Net investment income 0.86 0.83 0.76 0.71 0.70
Net realized and
unrealized gain
(loss)on investments 5.41 (1.28) 3.46 (2.51) 5.44
---- ------ ----- ----- -----
Total from
investment operations 6.27 (0.45) 4.22 (1.80) 6.14
---- ------ ----- ----- -----
Less distributions from:
Net investment income (0.86) (0.83) (0.76) (0.71) (0.75)
Net realized gains (5.16) (0.03) (0.49) (1.41) (2.07)
----- ------ ------ ------ ------
Total distributions (6.02) (0.86) (1.25) (2.12) (2.82)
----- ------ ------ ------ ------
Net asset value,
end of year $27.92 $27.67 $28.98 $26.01 $29.93
------ ------ ------ ------ ------
Total Return 22.78% (1.51)% 16.22% (5.77)% 23.07%
Net assets, end of
year(in 1000's) $33,037 $28,482 $33,105 $28,273 $32,385
Ratio of expenses to
average net
assets(a) 0.85% 0.87% 0.85% 0.86% 0.85%
Ratio of net investment
income to average net
assets 2.63% 3.15% 2.74% 2.24% 2.37%
Portfolio turnover
rate (annualized) 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).
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. 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 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, 2020, 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 17, 2022, 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 included within Level 1
that are observable for the asset or liability, either directly or indirectly
(including quoted prices for similar investments, interest rates, prepayment
speeds, credit risk, etc.).
Level 3 - significant unobservable inputs for the asset or liability (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, 2021:
Investments Other
in Financial
Level Securities Instruments *
----- ---------- -----------
Level 1:
Common Stock $32,446,230 $ 0
Short term investments 547,763 0
----------- ------------
Total Level 1: 32,993,993 0
Level 2 0 0
Level 3 0 0
----------- ------------
Total $33,993,993 $ 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, 2021, 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, 2021.
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, 2021 December 31, 2020
------------------- -------------------
Shares Amount Shares Amount
Shares sold 41,349 $ 1,228,200 40,996 $ 1,112,667
Shares issued in
reinvestment of
dividends 210,857 5,861,834 31,496 860,748
-------- -------- -------- ---------
252,206 $ 7,090,034 72,492 1,973,415
Shares redeemed (98,148) (3,063,535) (185,502) (4,625,549)
-------- -------- -------- ---------
Net increase(decr) 154,058 4,026,499 (113,010) (2,652,134)
Beginning of year 1,029,369 20,647,680 1,142,379 23,299,814
---------- ---------- --------- ----------
End of year 1,183,427 $ 26,674,179 1,029,369 $ 20,647,680
========== ========== ========= ==========
5. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales of investment
securities, excluding short-term investments, aggregated $12,174,797
and $13,097,858, respectively, for the year ended December 31, 2021.
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 27, 2021, the Fund paid an income distribution of $0.8628 per share
to shareholders of record on December 23, 2021 for a total distribution of
$839,093, a short term gain of $0.8843 for a total of $860,030, and a long-term
capital gain distribution of $4.2801 per share for a total distribution of
$4,162,710.
STOCK DIVIDEND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
6. TAX MATTERS (continued)
On December 21, 2020, the Fund paid an income distribution of $0.8316 per share
to shareholders of record on December 18, 2020 for a total distribution of
$831,222, and a long-term capital gain distribution of $0.0295 per share for a
total distribution of $29,526.
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.
The Fund?s distributable earnings on a tax basis are determined only at the end
of each fiscal year. As of December 31, 2021, the Fund?s most recent fiscal
year-end, the components of distributable earnings on a tax basis were as
follows:
Unrealized Appreciation $ 8,363,232
Undistributed Realized Long-Term Gains $ 0
Undistributed Ordinary Income $ 0
-----------
Total Distributable Earnings, Net $ 8,363,232
As of December 31, 2021, the tax basis components of unrealized appreciation
(depreciation) and cost of investments were as follows:
Gross tax appreciation of investments $ 9,130,419
Gross tax depreciation of investments $ (767,187)
---------
Net tax appreciation of investments $ 8,363,232
Federal tax cost of investments,
Including short-term investments $ 24,630,718
As of December 31, 2021, open Federal tax years, subject to examination, include
the tax years ended December 31, 2019 through December 31, 2021. As of and
during the year ended December 31, 2021, 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
STOCK DIVIDEND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
7. ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)
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
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 2021, as computed pursuant to the investment advisory
agreement, totaled $272,551, of which $22,723 was payable on December 31, 2021.
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, 2021, there were no redemption fees received by the
Fund.
ADDITIONAL INFORMATION (Unaudited)
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-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.
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 is cash holdings and access to other funding sources.
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. The Board of Directors concluded the
Fund?s liquidity risk management program is reasonable designed to prevent
violation of the Liquidity Rule and that 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 (Unaudited)
Stock Dividend Fund, Inc.
December 31, 2021
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 Teacher/Administrator,
Age 64 Prince of Peace School,
Tech Co. Manager prior
Yolawnde F. Malone Director 1 Retired 2021, prior
Age 58 Pres. Whitford Capital,
prior Senior Tax Mngr,
Montgomery Cosia
Greilich LLP
INTERESTED DIRECTORS
Laura S. Adams Director, 1 Member, Adams
Age 60 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 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.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors 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, 2021, the related statements of operations and changes in net
assets for the year ended December 31, 2021, including the related notes, and
the financial highlights for the year ended December 31, 2021 (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, 2021 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, 2021 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 17, 2022
We have served as the Fund?s auditor since 2018.
Item 2. Code of Ethics. The registrant, as of the end of the period
covered by this report, has adopted a code of ethics that applies to
all officers and employees of the Fund. The registrant updated and
amended its code of ethics on February 21, 2020 but did not grant any waivers or
exceptions to the code during the covered period.
Item 3. Audit Committee Financial Expert. The entire Board of
Directors, in effect, acts as the audit committee. The Board has two
financial experts serving on the Board. Laura Adams and Yolawnde
Malone are the financial experts. Mrs. Adams is an "interested"
Director and Mrs. Malone is an "independent" Director.
Item 4. Principal Accountant fees and services.
(a)-(d) Total fees billed to the registrant for the last two fiscal years for
professional services rendered by the registrant?s independent auditor were as
follows:
December 31,2021 December 31, 2020
Audit $14,000 $13,000
Audit-Related fees $0 $0
Tax preparation fees $0 $0
Other fees $0 $0
Audit fees include amounts related to the annual audit of the registrant?s
financial statements, spot checks for compliance with Rule 17f-2 and services
normally provided by the auditor in connection with statutory and regulatory
filings. The registrant performance tax preparation internally.
(e)(1) The directors have not adopted pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-10 of Regulation S-X.
(e)(2) None
(f) Not applicable
(g) The aggregate fees billed for the most recent fiscal year and the preceding
year by the registrant?s independent auditor for non-audit services rendered to
the registrant, its investment advisor, and any entity controlling, controlled
by, or under common control with the advisor that provided ongoing services to
the registrant were $0 and $0, respectively.
(h) Not applicable
Item 5. Audit Committee of listed Registrants. (Not applicable)
Item 6. Schedule of Investments. Schedule of Investments is included
as part of the report to shareholders filed under Item 1 of this Form.
Item 7. Disclosure of proxy voting policies and procedures for closed-
end management investment companies. (Not applicable)
Item 8. Portfolio Managers of Closed-End Management Investment
Companies. Not Applicable to open-end investment companies.
Item 9. Purchase of equity securities by closed-end management
investment companies. (Not applicable)
Item 10. Submission of Matters to a vote of security holders. (None)
Item 11. Controls and Procedures
a) The Fund's President has concluded that the Fund's disclosure
controls and procedures are sufficient to ensure that information
required to be disclosed by the Fund in this Form N-CSR was
recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and
forms, based upon such officers' evaluation of these controls and
procedures as of a date within 90 days of the filing date of the
report.
b) There were no significant changes or corrective actions with
regard to deficiencies or material weaknesses in the Fund's internal
controls or in other factors that could significantly affect the
Fund's internal controls subsequent to the date of their evaluation.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management
Investment Companies. (Not applicable)
Item 13. Exhibits.
a) (1)Code of Ethics- Filed with N-CSR and hereby incorporated by
reference as Exhibit (p) of Post-Effective Amendment No. 28
(485BPOS)of our Registration under the Securities Act of 1933 filed on
2/14/2021 and can be viewed on the SEC.gov website under company filings.
A copy of the Code of Ethics can also be obtained by calling us at 1-800-
704-6072.
(2)Certifications pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002- Attached
b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002- Attached
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Stock Dividend Fund
By /s/ Laura S. Adams
--------------------------------------
Laura S. Adams
President
Principal Executive Officer and Principal Financial Officer
Date 2/17/22
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below
by the following persons on behalf of the registrant and in the
capacities and dates indicated.
Stock Dividend Fund
By /s/ Laura S. Adams
--------------------------------------
Laura S. Adams
President
Principal Executive Officer and Principal Financial Officer
Date 2/17/22