Final results for The North American Income Trust for the year that ended 31 January 2014 show the fund delivering an 18.9% return on net assets, which isn’t bad but does lag the 25.0% return on the S&P500 Index by some margin. The fund’s discount widened from 5% to 7.9% over the year and so the return to shareholders was 15.5%. The fund’s dividend was increased from 27p to 30p and this was covered 1.09x by revenues. Around a fifth of the fund’s revenues came from option transactions.
A strong dollar boosted the returns quoted above (which are in Sterling). The need to generate income from the portfolio meant that they were underweight the healthcare (principally biotech) and technology sectors which was unfortunate as these were the strongest areas of the US market.
The three best performing stocks in the portfolio were Digital Realty Trust, Target Corp., and Republic Services. The managers say technology-related REIT Digital Realty Trust showed that it had recovered well from prior year management and operating issues as leasing outcomes to new customers improved at the same time it made good progress in reducing its inventory of unleased properties. Retailer Target had a turbulent year that culminated in a CEO change and the closure and subsequent write down of its ill-fated Canadian operations. Its new management team headed by Brian Cornell made an impressive start that reinvigorated in-store sales as well as boosting performance in the previously neglected e-commerce channel. Waste management services provider Republic Services reported generally positive results during the review period.The company benefited mainly from healthy revenue growth in its industrial segment that more than offset relative weakness in its slower growing residential business.
On the down side, significant detractors included Freeport-McMoRan Copper & Gold and toy-maker Mattel. Shares of Freeport-McMoRan Copper & Gold fell along with those of its peers, hampered by the continuing steady declines in copper and oil prices. Mattel recorded disappointing sales at home and abroad with particular weakness in its key Barbie and Fisher-Price brands. CEO Bryan Stockton resigned earlier this year to be replaced by interim CEO Richard Dickson who is credited with the prior success of Barbie sales.
NAIT : North American Income held back by biotech and tech underweights