North American Income Trust’s net asset value per share rose by 3.2% on a total return basis over the year that ended on 31 January 2016. The reference benchmark, the S&P 500, provided a total return of 5.2% in sterling terms and the Russell 1000 Value, which was incorporated as an additional measurement during the year returned 0.6%. Since the end of their financial year, there has been some recovery of the company’s previous underperformance. Between 1 February and 21 March, the NAV outperformed the S&P 500 and the Russell 1000 Value indices by 2.5% and 1.4% respectively on a total return basis.
The company’s share price fell by 5.8% to 815.0p and ended the year at a 12.9% discount to total net asset value, compared with a 7.9% discount at the end of the 2015 financial year.
The revenue return per ordinary share rose by 9.3% from 32.71p to 35.74p. The Directors declared a third interim quarterly dividend of 7.0p (increased from 6.5p) and are recommending a final dividend of 13.0p (increased from 11.50p), which will take the total dividends for the year to 33.0p (2015 – 30.0p), an increase of 10.0%.
Against the Russell 1000 Value Index, the equity portfolio returned an outperformance of 372 basis points. The largest contributor to relative performance was stock selection, mainly in the industrials, financials and consumer staples sectors. Overweight allocations to consumer staples and telecoms also added to relative performance. The portfolio also benefited from stock-specific performance of beer brewer and distributor Molson Coors, enterprise software company Microsoft Corp and diversified chemicals company Dow Chemical, all of whom had a relatively eventful year of deal-making and good operational execution.
The largest detractors from relative performance were an overweight allocation to materials, which was weak during the year amid the rout in commodity and oil prices, and the underweight allocation to healthcare. Stock selection within materials was also weak, most notably fertiliser maker Potash Corp. of Saskatchewan, which continued to face tremendous pressure on its business as fertiliser prices crumbled during the year. Additionally, the holding in office products retailer Staples affected performance. The company’s higher margins were offset by year-on-year declines in revenue over the period attributable mainly to weakness in its international business amid continued dollar strength. Staples also faced a steep regulatory hurdle in consummating its planned merger with rival Office Depot.
NAIT : North American Income achieves 10% dividend growth