TIDMBRCI
BlackRock Commodities Income InvTst
25 February 2019
BlackRock Commodities Income: New research
25/02/2019
-- BRCI has a conviction-led approach to delivering a high
income from the global mining and energy sectors...
Read more
BlackRock Commodities Income (BRCI) has a conviction-led
approach to delivering a high income from the global mining and
energy sectors. The shares currently yield 5.7%, considerably more
than funds exposed to many other areas of the market. The managers
have flexibility to invest in equities and fixed income to generate
this income. With the top ten holdings currently accounting for 51%
of total assets, relative to most equity funds it can be considered
highly concentrated.
Managed by Olivia Markham and Tom Holl, BRCI typically has a
roughly even split between mining and energy stocks. Reflecting the
income mandate as well as the current outlook of the managers, a
significant proportion of the trust is invested in the larger,
diversified companies within each sector. The managers believe that
within both of these sectors, diversified mega-caps are hugely
cash-generative at current commodity price levels. With solid
balance sheets and management focused on shareholders, they seem
set fair for dividend hungry investors.
BRCI's objectives are to achieve both an annual dividend target
and, over the long term, capital growth. The board considers a
"reference index", of 50% EMIX Global Mining and 50% MSCI World
Energy Index to compare performance, but does not see it as a
benchmark, given the high-income mandate of the trust. Over the
longer term, during what has been a severely volatile time for
mining and energy companies, the trust has not kept pace with the
reference index. 2018 started very positively, with the managers
generating significant outperformance of the reference index, only
to see worries of a China slow down and trade wars, erode it. BRCI
has started 2019 in a positive manner, with the NAV + 1.9% at the
time of writing, outperforming the AIC peer group which is -0.6% in
NAV terms.
Income has been (and continues to be) a major focus for the
managers and board. However, the trust was not insulated from the
dividend cuts experienced by the sector, and the board reduced the
dividend from 6p paid in 2015 to the current level of 4p. In the
recently published annual results, the board has renewed its
commitment to targeting 4p for the financial year ending 30(th)
November 2019.
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