North American Income Trust (NAIT) has announced its interim results for the six-months ended 31 July 2020, which shows that it has successfully navigated challenging markets. During the period, NAIT’s NAV per share declined by 11.7% on a total return basis in sterling term, which the trust says marginally underperformed the -10.7% return in sterling terms from the Russell 1000 Value Index (NAIT’s reference index). This underperformance primarily resulted from stock selection in the materials, utilities and consumer staples sectors. Conversely, stock selection in consumer discretionary, industrials and information technology sectors benefitted NAIT’s performance. The results highlight that, despite the obvious short term challenges, the NAIT’s longer-term performance has been relatively strong: over the five year period to 31 July 2020, NAIT’s NAV total return was 64.6% compared to the 54.4% from the Russell 1000 Value Index in sterling terms.
Dividend update – growth in revenue income
The revenue return per Ordinary share rose by 27.0% from 5.35p to 6.80p. The Board has declared a second quarterly dividend of 1.8p per share, giving total dividends for the first half of the year to 31 January 2021 of 3.6p (2020 – 3.4p), a 5.9% increase. The second quarterly dividend is payable on 30 October 2020 to shareholders on the register on 2 October 2020.
Portfolio – income generation
As at 31 July 2020, equities represented 97% of total assets. NAIT says that total revenue from these holdings was £8.3 million (2019 – £7.9m million) and that most of its equity holdings continued their established record of dividend growth. Over 19% of NAIT’s holdings raised their dividends over the past six months, with a weighted average increase of 8.7%. NAIT also received premiums totalling £3.9 million (2019 – £1.9 million) in exchange for entering into stock option transactions. This option income represented 31.6% of total income (2019 – 19.2%). The income from options premiums has benefited from the higher than usual market volatility in the spring and the manager does not expect that NAIT will generate similar levels of option premium income in the second half of the year. Interest income of £300,000 from bonds was broadly similar to last year. Dividends will remain the primary source of income available for distribution.