UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSRS
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)
10670 N. Central Expressway #470 Dallas, Texas 75231
(Address of principal executive offices)
Laura S. Adams
10670 N. Central Expressway #470 Dallas, Texas 75231
(Name and address of agent for service)
Registrants telephone number, including area code: 800-704-6072
Date of fiscal year end: December 31
Date of Reporting Period: June 30, 2024
Item 1. Report to Shareholders.
STOCK DIVIDEND FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2024
Stock Dividend Fund, Inc.
10670 N. Central Expressway #470
Dallas, Texas 75231
1-800-704-6072
Fund Symbol: SDIVX
Dear shareholders of Stock Dividend Fund, Inc.,
The Fund ended the first six months of 2024 with a Net Asset Value per
share of $25.42, up from a Net Asset Value per share of $23.57 at the beginning
of the year.
For the period December 31, 2023 through June 30, 2024 the Fund's total
return was up 7.85% versus the SPDR S&P 500 ETF up 15.23% and the SPDR S&P 500
High Dividend ETF up 4.89%.
In the first half of 2024, S&P 500 Value oriented and high dividend paying
stocks underperformed technology growth stocks, a handful of which are large
components and drivers of the S&P 500 Index, very similar to last year. We
expect a rotation back into large cap value and high 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 relative debt, low pension and post-retirement
liabilities, high dividend income, strong dividend coverage and stable cash
flows. If interest rates head back to relatively low levels as we expect, this
should be a rewarding combination as investment allocation decisions will be
forced back into this category for income and growth.
The Fund has experienced low turnover at 2.20% annualized year to date. Our top
holdings and industry group exposures, as of June 30, 2024, are listed below.
Regardless of general market volatility in the short term, we are 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, 2024
Top Ten Holdings*
(% of Net Assets)
Citigroup Inc. 6.97%
Chevron Corp 6.88%
Bank of America 6.01%
AbbVie Inc. 5.68%
Valero Energy Corp 5.64%
Altria Group Inc. 5.53%
Bristol-Myers Squibb Co 5.28%
Newmont Corp 5.27%
Kimberly-Clark Corp 5.10%
AT&T 5.05%
------
57.41%
Asset Allocation
(% of Net Assets)
National Commercial Banks 15.04%
Pharmaceutical Preparations 14.05%
Petroleum Refining 12.52%
Cigarettes Tobacco 9.88%
Telephone Communications, Except Radiotelephone 9.79%
Gold and Silver Ores 5.27%
Paper Prods 5.10%
Electronic Computers 4.96%
Biolog Prod 4.96%
Pipe Lines 4.47%
Canned, Frozen & Preserved Fruit, Veg & Food 4.11%
Food & Kindred Prod 3.88%
Computer Communications Equipment 3.43%
Other Assets, Less Liabilities, Net 2.54%
-------
100.00%
*Portfolio holdings are subject to change and are not recommendations of
individual stocks
?
STOCK DIVIDEND FUND, INC.
EXPENSES
JUNE 30, 2024
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, 2023 to June
30, 2024.
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, 2023
December 31, 2023 June 30, 2024 to June 30, 2024
----------------- ------------- -----------------
Actual $ 1,000 $ 1,078.50 $ 4.38
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, 2024
ASSETS
Investment securities, at
fair value(cost $23,024,411) $ 28,626,442
Cash 684,906
Dividends Earned 78,875
Interest receivable 124
-----------
Total assets 29,390,346
-----------
LABILITIES
Advisory fees payable 20,558
-----------
Total liabilities 20,558
-----------
NET ASSETS -
(Equivalent to $25.42 per
share based on 1,155,548 shares
of common stock issued and outstanding;
100,000,000 shares authorized,
$0.001 par value $ 29,369,788
============
NET ASSETS CONSIST OF:
Common stock $ 1,155
Paid-in capital 23,341,724
Net unrealized appreciation
of investments 5,602,031
Undistributed net investment income 504,043
Undistributed net realized gain on
Investments (79,165)
------------
Net assets $ 29,369,788
============
See accompanying notes to these financial statements.
STOCK DIVIDEND FUND, INC.
SCHEDULE OF INVESTMENTS (Unaudited)
JUNE 30, 2024
DESCRIPTION SHARES MARKET VALUE
----------- ------ -------
COMMON STOCKS ? 97.46%
National Commercial Banks-15.04%
Bank of America 44,380 1,764,993
Citigroup Inc. 32,275 2,048,172
Wells Fargo 10,166 603,759
---------
4,416,924
Pharmaceutical Preps-14.05%
AbbVie Inc. 9,730 1,668,890
Bristol-Myers Squibb Co 37,368 1,551,893
Pfizer Inc. 32,419 907,084
---------
4,127,867
Petroleum Refining-12.52%
Chevron Corp. 12,916 $ 2,020,321
Valero Energy Corp 10,569 1,656,796
---------
3,677,117
Cigarettes Tobacco-9.88%
British American Tobacco Industries 41,314 1,277,842
Altria Group 35,673 1,624,905
---------
2,902,747
Telephone Communications, Except
Radiotelephone-9.79%
AT&T 77,649 1,483,872
Verizon 33,788 1,393,417
---------
2,877,289
Gold and Silver Ores-5.27%
Newmont Corp. 36,957 1,547,390
Paper Prods-5.10%
Kimberly-Clark Corp 10,833 1,497,121
Electronic Computers-4.96%
Apple Inc. 6,917 1,456,859
Biolog Prod-4.96%
Amgen Inc. 4,659 1,455,705
- Continued ?
STOCK DIVIDEND FUND, INC.
SCHEDULE OF INVESTMENTS, continued
(Unaudited)
JUNE 30, 2024
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
Pipe Lines-4.47%
HF Sinclair Corp 24,633 1,313,924
Canned, Frozen & Preserved Fruit, Veg-4.11%
Kraft Heinz Company 37,437 1,206,220
Food & Kindred Prod-3.88%
Conagra Brands Inc. 40,105 1,139,784
Computer Communications Equipment-3.43%
Cisco Systems Inc. 21,206 1,007,497
Total common stocks (cost $23,024,411) $ 28,626,444
----------
SHORT-TERM INVESTMENTS ? 2.33%
Schwab Money Market Fund (Single Class Fund)
-current interest at 0.45% 684,906 $ 684,906
---------
Total short-term investments (cost $ 684,906) 684,906
---------
Total investment securities ? 99.80% (cost $23,709,317) 29,311,350
Other assets less liabilities ? 0.20% 58,438
--------
Net assets - 100.00% $ 29,369,788
============
See accompanying notes to these financial statements.
STOCK DIVIDEND FUND, INC.
STATEMENT OF OPERATIONS (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2024
INVESTMENT INCOME:
Dividends $ 626,446
Interest 937
Accrued Interest 124
------------
Total investment income 627,507
EXPENSES -
Advisory fees 122,396
Misc expenses 944
--------
123,340
Net investment income 504,167
------------
GAINS ON INVESTMENTS -
Net realized gain on investments (79,165)
Net change in unrealized appreciation of securities 1,742,845
------------
Net realized and unrealized gain on investments 1,663,680
------------
Net increase in net assets resulting from operations $ 2,167,847
============
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, 2024 Dec. 31, 2023
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 504,167 $ 998,912
Net realized gain on investments (79,165) 3,316,671
Net change in unrealized appreciation
of securities 1,742,845 (3,133,763)
----------- -----------
Net increase(decrease) in net assets
resulting from operations 2,167,847 1,181,820
DISTRIBUTIONS TO SHAREHOLDERS
Total Distributions (0) (4,315,583)
CAPITAL SHARE TRANSACTIONS($)
Shares sold 223,000 122,894
Shares issued for distribution reinvest 0 4,071,695
Shares redeemed (1,004,585) (5,023,510)
----------- ------------
(781,585) (828,921)
TOTAL INCREASE(DECREASE) IN NET ASSETS 1,396,262 (3,962,684)
NET ASSETS, beginning of period 27,983,526 31,946,210
----------- ------------
NET ASSETS, end of period 29,369,788 $ 27,983,526
=========== ============
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
6/30/24 2023 2022 2021 2020 2019
----- ------ ------ ------ ------ ------
Net asset value,
beginning of period $23.57 $26.67 $27.92 $27.67 $28.98 $26.01
------ ------- ------- ------ ------ ------
Income from investment
operations:
Net investment income 0.43 0.87 0.84 0.86 0.83 0.76
Net realized and
unrealized gains
(losses)on investments(1.42) 0.06 (0.67) 5.41 (1.28) 3.46
---- ------ ------ ----- ----- -----
Total income(loss)from
investment operations (1.85) 0.93 0.71 0.17 6.27 (0.45)
---- ------ ------ ------ ----- -----
Less distributions from:
Net investment income (0.00) (0.91) (0.85) (0.86) (0.83) (0.76)
Net realized gains (0.00) (3.12) (0.57) (5.16) (0.03) (0.49)
---- ------ ------ ------ ------ ------
Total distributions (0.00) (4.03) (1.42) (6.02) (0.86) (1.25)
---- ------ ------ ------ ------ ------
Net asset value,
end of period $25.42 $23.57 $26.67 $27.92 $27.67 $28.98
------ ------ ------ ------ ------ ------
Total Return 7.85% 4.56% 0.67% 22.78% (1.51)% 16.92%
Net assets, end of
period(in 1000's) $29,370 $27,984 $31,846 $33,037 $28,482 $33,105
Ratio of expenses to
average net
asset(a) 0.85% 0.86% 0.86% 0.85% 0.87% 0.85
Ratio of net investment
income to average net
assets (annualized) 3.51% 3.54% 2.97% 2.63% 3.15% 2.74%
Portfolio turnover
rate (annualized) 2.20% 41.34% 28.97% 38.45% 34.06% 14.41%
(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 generally 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, 2024, 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 11, 2024, 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, 2024:
Investments Other
in Financial
Level Securities Instruments *
----- ---------- -----------
Level 1:
Common Stock $28,626,444 $ 0
Short term investments 684,906 0
----------- ------------
Total Level 1: 29,311,350 0
Level 2 0 0
Level 3 0 0
----------- ------------
Total $29,311,350 $ 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, 2024, 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, 2024 December 31, 2023
----------------------- -----------------------
Shares Amount Shares Amount
Shares sold 8,874 $ 223,000 4,688 $ 122,894
Shares issued in
reinvestment of
dividends 0 0 178,648 4,070,819
---------- ---------- ---------- -----------
8,874 223,000 183,336 $ 4,193,713
Shares redeemed (40,682) (1,004,585) (193,861) (5,023,510)
---------- ---------- ---------- -----------
Net increase
(decrease) (31,808) (781,585) (10,525) (829,797)
Beginning of year 1,187,355 24,123,152 1,197,880 $24,952,949
---------- ---------- ---------- -----------
End of year 1,155,547 23,341,724 1,187,355 $24,123,152
========== ========== ========== ===========
5. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales of investment
securities, excluding short-term investments, aggregated $314,189
and $997,523, respectively, for the Period ended June 30, 2024.
The aggregate cost of investment securities, excluding short term investments,
for federal income tax purposes was $23,024,411 as of June 30, 2024. 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, 2024.
STOCK DIVIDEND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
As of December 31, 2023 and the Period ended June 30, 2024, the aggregate
unrealized appreciation and depreciation of investment securities was as
follows:
Description June 30, 2024 December 31,2023
----------- --------- ----------
Unrealized appreciation $ 6,618,838 $ 5,145,703
Unrealized depreciation (1,016,807) (1,286,516)
---------- -----------
Net unrealized
appreciation $ 5,602,031 $ 3,859,187
============== =============
6. DISTRIBUTION TO SHAREHOLDERS
The Fund has paid no distributions in 2024 to date as of June 28, 2024.
On June 1, 2023, the Fund paid an income distribution of $0.3981 per share to
shareholders of record on May 31, 2023 for a total distribution of $414,000
(100% qualified), and also a long-term capital gain distribution of $2.44 per
share for a total distribution of $2,956,650. In addition, on December 21,
2023, the Fund paid an income distribution of $0.5127 per share to shareholders
of record on December 20, 2023 for a total distribution of $584,049 (100%
qualified), and also a long-term capital gain distribution of $0.6795 per share
for a total distribution of $774,524.
On December 28, 2022, the Fund paid an income distribution of $0.8526 per share
to shareholders of record on December 27, 2022 for a total distribution of
$969,113 (100% qualified), and a long-term capital gain distribution of $0.5721
per share for a total distribution of $650,326.
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.
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, 2024, as computed pursuant to
the investment advisory agreement, totaled $122,396, of which $20,588 was
payable on June 30, 2024.
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, 2024, there were no redemption fees received by the
Fund.
9. ACCOUNTING FOR UNCERTAIN TAX POSITIONS
As of December 31, 2023, open Federal tax years, subject to examination, include
the tax years ended December 31, 2021 through December 31, 2023. 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, 2023, 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 18, 2024, 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. In
2023, the Fund was up 4.56% versus up 26.19% for the S&P500 Index ETF and
up 3.96% for the SPDR S&P 500 High Dividend ETF. For the five years ending
2023 annualized the Fund was up 8.14% versus up 15.67% for the S&P 500
Index ETF and up 7.78% for the SPDR S&P 500 High Dividend ETF. For the ten
years ending 2023 annualized the Fund was up 6.59% versus up 12.01% for the
S&P 500 Index ETF and up 7.84% for the SPDR S&P 500 High Dividend ETF. It
was noted that growth oriented and Index strategies have had meaningful
exposure to high p/e technology stocks and have thus outperformed Income
and 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
Income and 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, 2024
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, 10670 N. Central
Expressway, Suite 470, Dallas, Texas, 75231.
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 66 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 60 at Auction Source, LP
(2010-2019) Dallas, Texas
INTERESTED DIRECTORS
Laura S. Adams Director, 1 Yr Member, Adams
Age 62 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.
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 has not made
any amendments to its code of ethics or granted any waivers or
exceptions to the code during the covered period. A copy of the Code of Ethics
of the Fund is available upon request by calling 1-800-704-6072.
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 Jennifer Lapeyre are
the financial experts. Mrs. Adams is an "interested"
Director and Mrs. Lapeyre 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 31,2023 December 31, 2022
Audit $15,500 $14,000
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 for
semi-annual reports)
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-Not applicable for semi-annual reports.
(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 7/11/24
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
--------------------------------------f
Laura S. Adams
President
Principal Executive Officer and Principal Financial Officer
Date 7/11/24