BlackRock American Income (BRAI) – formerly BlackRock Sustainable American Income Trust – has announced its results for the year ended 31 October 2024, during which its net asset value per share (NAV) returned 16.0% and the share price returned 13.8%, both underperforming its benchmark, the Russell 1000 Value Index, which it says returned 23.2% (all figures are in sterling terms). In the same period, and as a broader comparison, the S&P 500 Index was up by +30.2%.
The largest detractor from relative performance was stock selection in consumer staples, with consumer staples distribution and retail industry accounting for the majority of underperformance. In health care, the overweight allocation along with stock selection within the health care providers and services industry proved costly. Other detractors from relative results included selection decisions within energy, specifically oil, gas and consumable fuels.
The largest contributor to relative performance was stock selection in industrials. Within the sector, the manager’s overweight allocation to the building products industry accounted for the majority of relative outperformance. In materials, an underweight allocation along with positive stock selection in chemicals boosted relative returns. Furthermore, stock selection in communication services proved beneficial, mainly due to stock selection within the entertainment industry.
BRAI’s board says that it is disappointed with the company’s performance relative to the Russell 1000 Value Index, which comes at a time where a continuation vote is rapidly approaching. Following a review of a wide range of options over the last few months, the board is proposing to shareholders a change of investment strategy that will offer a differentiated approach to investing in US value equities with an enhanced dividend policy but at a lower cost. We have covered this in another story this morning, which you can read about here.
Revenue earnings and dividend
BRAI’s revenue earnings per share amounted to 3.39p (2023: 3.67p), a decrease of 7.6%. Four quarterly interim dividends of 2.00p per share were paid on 26 April 2024, 5 July 2024, 1 October 2024 and 2 January 2025, which is in line with the payments made in the previous financial year. The dividend paid represents a yield of 4.2% on the share price at the year end.
BRAI’s board considers that it remains appropriate to continue with an enhanced dividend policy, supported through both revenue and other distributable reserves. The board continues to believe that such a dividend policy provides an attractive option for investors who wish to achieve exposure to the US equity market, whilst at the same time receiving a competitive dividend. If its proposals are approved, the enhanced dividend will increase to 1.5% of NAV per quarter (equivalent to 6% of NAV per annum).
Discount management
BRAI’s board acknowledges that its underperformance over the past couple of years compared to the Russell 1000 Value Index may have contributed to the discount widening out, but counters that it has put in place a consistent buyback policy that has helped to defend the discount which at 25 February 2025 was 7.4%.
Over the company’s financial year to end October 2024, the company’s shares have traded at an average discount of 9.6%. During the year, the company purchased 8,280,074 shares at an average price of 194.78p per share at an average discount of 9.9% for a total cost of £16,128,000. The buyback of shares during the year has provided a gross capital uplift of £1.75m (1.07% of the daily average NAV). Since the year end and up to 25 February 2025, a further 3,136,986 shares have been bought back at an average price of 205.06p per share for a total cost of £6,449,000. All shares have been placed in treasury. No shares were issued during the year under review and up to the date of this report.
