Friday, 14 June 2013

BlackRock N. American Income Trust (BRNA)

This income investment trust was launched last October and has recently issued its first half year report to 30th April 2013 (link via Investegate).

The manager believes that during the current increased market volatility and ongoing global macroeconomic concerns, dividend-paying equities offer two distinct attributes that make them especially attractive.

First, the dividend offers a potential income stream that is very attractive relative to alternatives like fixed income rates. . Dividend paying equities have been performing strongly relative to non-dividend paying equities, as the market is placing a higher value on the downside protection that dividends historically have offered.

In the 30 year period to 31 December 2011 S&P 500 dividend paying companies have generated annualised total returns of 8.61%. as compared with 1.35%. for S&P 500 non-dividend paying companies.

Secondly, in bear markets, the average total returns of companies that pay dividends have gone down, on average, about half as much as those that do not pay dividends. Dividend paying companies historically have also outperformed in bull markets.

Over the 6 month period, NAV has increased by 14.2% and to satisfy demand, a further 12.5m shares have been issued. The aim is to pay four quarterly dividends of 1.0p - starting yield of 4.0% - and are on track with a total of 2p declared todate.

From the half-year report:
“Dividends in the marketplace have grown markedly in recent quarters and look
well positioned for continued growth. There are now 408 companies paying
dividends in the S&P, close to a 15 year high, and the value of dividends paid in the last twelve months was US$281 billion, an all-time record for the US equity market. 
With high cash levels, the ability of companies to pay and grow dividends is evident and the willingness on the part of corporate management teams looks squarely in place given the demand for income in the market. We expect that dividends and dividend growth will be a significant contributor to total return for investors over the next couple of years and look forward to an enriched dividend commitment from our companies in the quarters to come.”

This income trust offers an opportunity to tap into some of the largest US companies - the top ten holdings are Chevron (3.3%), JP Morgan Chase (3.2%), Wells Fargo (3.1%), Pfizer (2.4%), Home Depot (2.4%), General Electric (2.4%),  Comcast                   (2.3%), Verizon (2.2%), Exxon Mobil (2.2%) and Philip Morris (2.1%).

Early days for this IT but appears to be off to a good start.

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