BlackRock North American Income Trust (BRNA) offers investors a portfolio of high-quality US companies at attractive valuations, with a track record of strong dividend growth. The trust is overseen by Tony DeSpirito (lead manager), Franco Tapia (co-manager) and David Zhao (co-manager).
Last year, in an attempt to attract new investors, the board announced a shift in strategy, increasing the dividend by 62% and allowing a proportion to be funded from capital. At the current share price the trust offers investors a yield of 4.3%. The move has paid off and the trust now trades at a premium of 1.2%.
BRNA believes that companies which pay dividends have stronger management teams, and that those that can grow their dividends offer attractive long-term returns at lower levels of volatility. To find these companies, the team uses a bottom-up, stock-specific approach, starting with a universe of the 500 largest US companies by market cap and breaking it down by fundamental analysis.
Since the current managers took over in 2014, there has been a marked improvement in the trust’s performance: it has now outperformed the benchmark Russell 1000 Value index in four of the past five calendar years, and this has been achieved at low levels of beta.
Currently yielding 4.5%, BRNA is an attractive option for investors looking for a source of equity income that isn’t one of the ‘usual suspect’ UK funds. Since changing its management team in 2014, the trust has been a true turnaround story. The impact that Tony has had on the portfolio has been stark, as we illustrate in the Performance section. Over three years he has generated the highest alpha of any manager focusing on North America excluding Canada (1.51), at relatively low levels of standard deviation (19.42%).
As such, we see the trust as a standout vehicle for the more cautious investor. The manager has shown a clear capacity to capture upside and limit downside, all the while delivering a strong level of income. Given the uncertain environment for world equities, we are not surprised that the trust now trades at a premium, and believe that BRNA is well suited to a more uncertain environment of elevated economic and political risks.
|Strong track record of delivering total returns
||Trading at a premium
|Now yielding 4.5%, with the Board having increased the dividend by over 60% last year
||Current uncertainty surrounding US market conditions
|Low levels of volatility are attractive in the current uncertain environment