North American Income Trust

Last updated 04 December 2019

A differentiated source of equity income from a focused portfolio of US equities…

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This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour. 

North American Income Trust

The North American Income Trust (NAIT) is a £427m investment trust which aims to generate a steady, growing income and capital growth over the long term. Managed by Ralph Bassett and Francis (Fran) Radano, the trust has seen its discount narrow sharply this year as it moved to split stock five-for-one – making it easier for small investors to buy.

Offering a yield of 2.8% the trust is one of two US-focused trusts which aim to generate income, achieving that via a focused portfolio of equities and bonds, mainly investing in large well-established businesses with strong records of capital deployment.

In addition to equities and bonds the managers also use derivatives at the margin to boost the portfolio’s income. The managers have grown the dividend by 9% per annum over the past five years, while at the same time building a significant revenue reserve where, five years ago, there was virtually none.

In performance terms the trust has delivered strong returns since Ralph and Francis took over in June 2015, generating NAV total returns of 79.6% against a rise of 61.7% in the Russell 1000 Value index. Shareholders have benefited further from a closing discount which means in share price terms the trust is up 104.6% over the same period.

Since the early summer 2019, NAIT has been trading at a premium to NAV, following a steady re-rating that it has enjoyed since the start of the year. The trust is now issuing shares, which we would argue is a positive development for all shareholders. Given the tiered management fee, the OCF should start to reduce meaningfully if share issuance continues.

Pascal Dowling
Pascal is a partner at Kepler Partners LLP and launched Kepler Trust Intelligence when he joined Kepler in 2015. Prior to this he managed FE Trustnet, one of the UK's largest investment research websites, for ten years. In a former life Pascal was a financial journalist and he has written extensively about investment trusts and other investments for the trade and national press.

Related Research

Key facts

Investment objective

An investment trust investing for above-average dividend income and long-term capital growth, mainly from a concentrated portfolio of US equities

As at:

21/11/19

Group/Investment

North American Income Trust

Ticker

NAIT

Management Company

Aberdeen Standard Investments Inc.

Manager Name

Ralph Bassett; Francis Radano;

Association of Investment Companies (AIC) Sector

North America

12 Mo Yield

2.8%

Dividend Distribution Frequency

Quarterly

Latest Market Capitalisation

£426,862,522

Latest Net Gearing (Cum Fair)

-1.0%

Latest Ongoing Charge Ex Perf Fee

0.95%

Turnover Ratio

40.2%

Shares Outstanding

143,002,520

(Discount)/ Premium (Cum Fair)

1.0%

Daily Closing Price

298.5p

Source: Morningstar

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