STOCK DIVIDEND FUND, INC.

 

 

 

ANNUAL REPORT

DECEMBER 31, 2023

 

 

 

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 2023 with a Net Asset Value per share of $23.57, after paying an income dividend of $0.3981 per share and long term capital gain of $2.4416 per share on June 1, 2023, and another income dividend of $0.5127 per share and long term capital gain of $0.6795 per share on Dember 21, 2023, which in total ($27.09) is up from a Net Asset Value per share of $26.67 at the beginning of the year.

 

For the period December 31, 2022 through December 31, 2023 the total

return of the Fund was up 4.56% versus the S&P 500 up 26.29% and the S&P 500 High Dividend ETF which was up 3.96%.  The S&P 500 is meaningfully driven by a handful of large cap technology stocks with high valuation levels and virtually no dividend income.  This year was the opposite of last year, when our portfolio dramatically outperformed the S&P 500 because large cap technology stocks underperformed.  We are confident that money will flow back toward value and income stocks and our portfolio should perform well, especially if interest rates decline.

 

The turnover of the Fund in 2023 above our average expectations at 41.34% as we realized capital gains and invested in high dividend paying opportunities.

 

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 2024 with a meaningfully above market internal portfolio dividend yield, 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, 2023, are listed on the following page.

 

We look forward to excellent performance in 2024.

 

Sincerely,

 

 

 

Steven Adams

Portfolio Manager

STOCK DIVIDEND FUND, INC.

Top Ten Holdings and Asset Allocation

December 31, 2023

 

 

Top Ten Holdings*

(% of Net Assets)

 

Chevron Corp.                            6.88%

Citigroup Inc                            5.93%

British American Tobacco Industries      5.58%

AbbVie Inc.                              5.56%

Bristol-Myers Squibb Co                  5.55%

Newmont Corp                             5.47%

Bank of America                          5.34%

Altria Group Inc                         5.14%

The Kraft Heinz Co                       4.95%

Valero Energy Corp                       4.91%

                                        ------

                                        55.31%

 

Asset Allocation

(% of Net Assets)

 

Pharmaceutical Preps                                             15.92%

National Commercial Banks                                        13.64%

Petroleum Refining                                               11.79%

Cigarettes                                                       10.72%

Telephone Communications, Except Radiotelephone                   9.21%

Gold and Silver Ores                                              5.47%

Canned, Frozen & Preserved Fruit, Veg                             4.95%

Pipe Lines                                                        4.89%

Biolog Prod                                                       4.80%

Electronic Computers                                              4.76%

Paper Prods                                                       4.70%

Food & Kindred Products                                           4.11%

Compu Comm Equip                                                  3.83%

Other Assets, Less Liabilities, Net                               1.21%

                                                                -------

                                                                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 Year End Year End

               2017     2018     2019     2020     2021     2022     2023

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

Fund           $263,841 $248,617 $288,946 $284,467 $349,269 $351,609 $367,642

S&P 500 Index  $289,150 $276,456 $364,369 $431,376 $555,095 $454,567 $574,073

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCK DIVIDEND FUND, INC.

PERFORMANCE SUMMARY (continued)

 

 

 

$580,000|                                                                 

$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 22 23

 

 

#=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  Annual  Annual       Average

                Return Return  Return  Return  Return    Annual Return

                2019   2020    2021    2022    2023      5 Year   10 Year

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

Fund            16.22% (1.51)% 22.78%   00.67%   4.56%    8.14%    6.59%

S&P 500 Index   31.48% 18.39%  28.68%  (18.11)% 26.29%   15.67%   12.01%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCK DIVIDEND FUND, INC.

EXPENSES

DECEMBER 31, 2023

 

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, 2023 to December 31, 2023.

 

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, 2023

               June 30, 2023    December 31, 2023   to December 31, 2023

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

 

Actual            $  1,000.00       $ 1,071.03            $   4.44

 

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, 2023

 

 

ASSETS

   Investment securities, at fair

          value(cost $23,786,910)           $  27,646,096

   Cash                                           274,094 

   Dividends receivable                            83,163

                                              -----------

              Total assets                     28,003,353

                                              -----------

 

LIABILITIES

   Advisory fees payable                           19,827

                                              -----------

              Total liabilities                    19,827

                                              -----------

 

NET ASSETS -

   Equivalent to $23.57 per

   share based on 1,187,356 shares

   of common stock issued and outstanding;

   100,000,000 shares authorized,

   $0.001 par value                          $ 27,983,526

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

 

 

NET ASSETS CONSIST OF:

  Common stock                               $      1,187

  Paid-in capital                              24,123,152

  Net unrealized appreciation                   3,859,187

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

Net assets                                   $ 27,983,526

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

 

Net asset value per share                    $      23.57

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2023

 

DESCRIPTION                                 SHARES      MARKET VALUE

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

 

COMMON STOCKS – 98.79%

 

Pharmaceutical Preps-15.92%

   AbbVie Inc.                              10,036      $   1,555,279

   Bristol-Myers Squibb Co                  30,245          1,551,871

   Pfizer Inc.                              46,798          1,347,314

                                                            ---------

                                                            4,454,464

 

National Commercial Banks-13.64%

   Bank of America                          44,380          1,494,275  

   Citigroup Inc.                           32,275          1,660,226

   Wells Fargo                              13,500            664,470

                                                            ---------

                                                            3,818,971

                                                                  

Petroleum Refining-11.79%                                          

   Chevron Corp.                            12,916          1,926,551

   Valero Energy Corp                       10,569          1,373,970

                                                            ---------

                                                            3,300,521

 

Cigarettes-10.72%

   British American Tobacco Industries      53,354          1,562,739

   Altria Group, Inc.                       35,673          1,439,049

                                                            ---------

                                                            3,001,788

 

Telephone Communications, Except

Radiotelephone-9.21%

   AT&T                                     77,649          1,302,950

   Verizon                                  33,788          1,273,808

                                                            ---------

                                                            2,576,758

 

Gold and Silver Ores-5.47%

   Newmont Corp.                            36,957          1,529,650

 

Canned, Frozen & Preserved Fruit, Veg-4.95%

   The Kraft Heinz Company                  37,437          1,384,420

 

Pipe Lines (No Natural Gas)-4.89%

   HF Sinclair Corp                         24,633          1,368,856

 

Biolog Prod-4.80%

  Amgen Inc.                                 4,659          1,341,885

 

 

 

The accompanying notes are an integral part of these financial statements

-    Continued –

STOCK DIVIDEND FUND, INC.

SCHEDULE OF INVESTMENTS, continued

DECEMBER 31, 2023

 

DESCRIPTION                                 SHARES        MARKET VALUE

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

 

Electronic Computers-4.76%

   Apple Inc.                                6,917          1,331,730

 

Paper Prods-4.70%

   Kimberly-Clark Corp                      10,833          1,316,318

 

Food and Kindred Products-4.11%

   Conagra Brands Inc                       40,105          1,149,409

 

Computer Communications Equipment-3.83%

   Cisco Systems Inc.                       21,206          1,071,327

                                                  

                                                           ----------

 

                                 

   Total common stocks (cost $23,786,910)               $  27,646,097

                                                           ----------

 

 

 

SHORT-TERM INVESTMENTS – 0.98%  

   Schwab Money Market Fund (Single Class Fund)      

              -current interest at 0.45%    274,094    $      274,094

                                                             --------

  

   Total short-term investments (cost $   274,094)            274,094

                                                             --------

 

Total investment securities – 99.77% (cost $24,061,004)    27,920,190

 

Other assets less liabilities –  0.23%                         63,336

                                                             --------

 

Net assets - 100.00%                                   $   27,983,526

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

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

STOCK DIVIDEND FUND, INC.

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2023

 

 

 

INVESTMENT INCOME

   Dividends (net of ADR withholding)                    $  1,238,967

   Interest                                                     1,461

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

          Total investment income                           1,240,428

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

 

EXPENSES -

   Advisory fees                                              241,516

                                                             --------

          Total Expenses                                      241,526

                                                             --------

 

          Net investment income                               998,912

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

 

GAIN(LOSS)ON INVESTMENTS -

   Net realized gain on investments                         3,316,671

   Net decrease in unrealized appreciation                 (3,133,763)

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

 

         Net realized and unrealized gain

           on investments                                     182,908

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

  

   Net increase

        in net assets resulting from operations            $1,181,820

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2023    Dec. 31, 2022

 

INCREASE(DECREASE) IN NET ASSETS

FROM OPERATIONS:

   Net investment income                    $   998,912    $    969,113

   Net realized gain (loss)on investments     3,316,671         650,326

   Unrealized appreciation(depreciation) 

     of investments                          (3,133,763)     (1,370,282)

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

      Net increase (decrease) in net assets

      resulting from operations               1,181,820         249,157

         

 

DISTRIBUTIONS TO SHAREHOLDERS                               

         Total Distributions                 (4,315,583)     (1,619,439)

 

 

CAPITAL SHARE TRANSACTIONS($)

   Shares sold                                  122,894          80,213

   Shares issued for distribution reinvest    4,071,695       1,619,661

   Shares redeemed                           (5,023,510)     (1,420,882)

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

                                               (828,921)        278,992

 

TOTAL INCREASE (DECREASE) IN NET ASSETS      (3,962,684)     (1,091,290)

 

NET ASSETS, beginning of year                31,946,210      33,037,500

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

 

NET ASSETS, end of year (includes          $ 27,983,526    $ 31,946,210

   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

                        2023     2022     2021     2020     2019

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

Net asset value,

  beginning of year     $26.67   $27.92   $27.67   $28.98   $26.01

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

Income (loss)from investment

operations:

  Net investment income  0.87      0.84     0.86     0.83     0.76

  Net realized and

  unrealized gain

  (loss)on investments   0.06     (0.67)    5.41    (1.28)    3.46

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

Total from                                     

  investment operations 0.93      0.17     6.27    (0.45)    4.22

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

Less distributions from:

  Net investment income (0.91)    (0.85)   (0.86)   (0.83)   (0.76)

  Net realized gains    (3.12)    (0.57)   (5.16)   (0.03)   (0.49)

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

    Total distributions (4.03)    (1.42)   (6.02)   (0.86)   (1.25)

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

Net asset value,

  end of year          $23.57    $26.67   $27.92   $27.67   $28.98

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

 

Total Return             4.56%     0.67%   22.78%   (1.51)%  16.22%

 

Net assets, end of            

   year(in 1000's)     $27,984    $31,846  $33,037  $28,482  $33,105

 

Ratio of expenses to

   average net

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

 

Ratio of net investment

   income to average net

   assets                3.54%     2.97%     2.63%     3.15%    2.74%

 

Portfolio turnover

   rate (annualized)    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).

 

 

 

 

 

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 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 December

31, 2023, 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 21, 2024, the date the financial statements were available for issuance and filed.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2023:

 

                                    Investments          Other

                                    in                   Financial

      Level                         Securities           Instruments *

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

      Level 1:

         Common Stock               $27,646,096          $          0

         Short term investments         274,094                     0

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

            Total Level 1:           27,920,190                     0

      Level 2                                 0                     0

      Level 3                                 0                     0

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

      Total                         $27,920,190          $          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, 2023, 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, 2023.

 

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, 2023     December 31, 2022

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

                       Shares       Amount     Shares       Amount

Shares sold            4,688   $   122,894     2,743   $    80,213

Shares issued in

  reinvestment of

  dividends          178,648     4,070,819    61,226     1,619,439

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

                     183,336   $ 4,193,713    63,969   $ 1,699,652

 

Shares redeemed     (193,861)   (5,023,510)  (49,516)   (1,420,882)

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

Net increase(decr)   (10,525)     (829,797)   14,453       278,770

 

Beginning of year  1,197,880    24,952,949 1,183,427    24,674,179

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

End of year        1,187,355  $ 24,123,152 1,197,880  $ 24,952,949

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

 

5.  INVESTMENT TRANSACTIONS

 

The aggregate cost of purchases and proceeds from sales of investment

securities, excluding short-term investments, aggregated $11,784,939

and $15,963,563, respectively, for the year ended December 31, 2023.

 

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 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.

 

STOCK DIVIDEND FUND, INC.

NOTES TO FINANCIAL STATEMENTS

 

 

6. TAX MATTERS (continued)

 

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.

 

The Fund’s distributable earnings on a tax basis are determined only at the end of each fiscal year.  As of December 31, 2023, the Fund’s most recent fiscal year-end, the components of distributable earnings on a tax basis were as follows:

 

Unrealized Appreciation                    $  3,859,187

Undistributed Realized Long-Term Gains     $          0

Undistributed Ordinary Income              $          0

                                            -----------

   Total Distributable Earnings, Net       $  3,859,187

 

As of December 31, 2023, the tax basis components of unrealized appreciation (depreciation) and cost of investments were as follows:

 

Gross tax appreciation of investments      $  5,145,703

Gross tax depreciation of investments      $ (1,286,516)

                                              ---------

Net tax appreciation of investments        $  3,859,187

 

Federal tax cost of investments,

   Including short-term investments        $ 24,061,004

 

As of December 31, 2023, open Federal tax years, subject to examination, include the tax years ended December 31, 2021 through December 31, 2023.   As of and during the year ended December 31, 2023, 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 2023, as computed pursuant to the investment advisory agreement, totaled $241,516, of which $19,827 was payable on December 31, 2023.

 

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. Management Ownership:  Directors and Officers of the Fund and their ownership:

               Fund Shares Owned   Dollar Range of            Percent of

Name           as of 12/31/23      Ownership as of 12/31/23   Class

 

Laura S. Adams          115,757     >$1,000,000                9.75%

  President & Director*

 

Steven Adams            115,757     >$1,000,000                9.75%

  Portfolio Manager* 

 

Jennifer T. Lapeyre           0      $     0-$   10,000        0.00%

  Director

 

Vicky L. Hubbard              0      $     0- $   10,000       0.00%

Director

 

*Laura S. Adams, President and an “interested” Director of the Fund and her husband, Steven Adams, Portfolio Manager of the Fund, control these shares through family related accounts.

 

9.  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, 2023, 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, 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.  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 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.  For 2023 the Fund was up 4.56% versus up 26.29% for the S&P 500 Index 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 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 and up 7.84% for the WisdomTree U.S. High Dividend Fund (SPDR S&P 500 High Dividend ETF does not have a ten year history yet).  It was noted that growth oriented strategies with high p/e technology weightings like the S&P 500 have outperformed large cap dividend 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 high dividend 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 (Unaudited)

Stock Dividend Fund, Inc.

 

December 31, 2023

 

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 65                             Prince of Peace School,  

                                   Tech Co. Manager prior      

                                                      

 

                                                          

Jennifer T Lapeyre  Director  1    Retired in 2019, prior

                                   Account Rep for non-profits

Age 61                             at Auction Source, LP

                                   (2010-2019) Dallas, Texas

 

      

 

INTERESTED DIRECTORS

 

Laura S. Adams      Director, 1    Member, Adams          

Age 62              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 of Stock Dividend Fund, Inc. (the “Fund”), including the schedule of investments, as of December 31, 2023, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (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 at December 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

 

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 Fund 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 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 the Fund’s 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 procedures included confirmation of securities owned as of December 31, 2023, by correspondence with the custodian, brokers and others; when replies were not received from brokers and others, we performed other auditing procedures. 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. We believe that our audit provides a reasonable basis for our opinion.

 

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

 

Dallas, Texas

February 21, 2024

 

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