BRIG provides the assurance of a solid income to see you through the short-term uncertainty…by Helal Miah

 

investingThis trust has been awarded a rating by Kepler for income & growth…Find out more

 
 
 

 
 

Overview

 

BlackRock Income & Growth (BRIG) has a core aim of delivering long-term growth of capital and income, primarily through listed UK equities. It can invest up to 20% of assets in foreign-listed equities. Adam Avigdori has co-managed the portfolio since April 2012 and David Goldman joined as new co-manager in July 2017.

Adam and David run a concentrated portfolio of about 40 stocks using a bottom-up approach. While they take a flexible approach, their search for companies that demonstrate sustainable free cash flows tends to lead them towards quality companies with strong balance sheets, disciplined capital allocation and adherence to ESG values.

However, it is worth noting that the portfolio managers have maintained balance in the portfolio, refraining from undertaking a significant style or sector bias. The bulk of the portfolio, namely 70%, is allocated to ‘income generators’. These are companies with sustainably high free cash flows and a growing dividend. 20% is allocated towards ‘growth’ companies with the remaining 10% in ‘turnaround’ opportunities.

Since Adam and David took over the management of the portfolio, performance has been roughly in line with the FTSE All-Share Index. The portfolio’s quality slant meant that it did not participate as much as its peers in the cyclical rally when economies reopened after the pandemic. On the other hand, this gave it some defensive qualities which has meant that it has held up well and ranks amongst the best performers in the peer group amidst the volatility so far in 2022.

BRIG’s strong back-up of revenue reserves allowed it to maintain its dividends throughout the pandemic while open-ended funds had to cut theirs. The most recent interim dividend was fully covered by income after a significant recovery in earnings during the half year (see Dividend). Its latest historic dividend yield is 3.9%, roughly in line with the sector average and it trades at a discount of 1.2%.

 

 

Analyst’s View

 

 

We believe that BRIG offers a differentiated approach compared to many of the other traditional UK equity income investment trusts. The caution and balance maintained in the portfolio, where a bias towards a particular style or sector is avoided, allows for flexibility in more challenging times over the short to medium term.

BRIG’s board was able to maintain the dividend during the pandemic and reserves have strengthened again recently, now equivalent to about a year’s worth of dividends. At the time of writing, BRIG’s discount has narrowed significantly in recent weeks. We believe that this is due to its defensive qualities amidst the increasing worries over global growth.

Adam and David have made timely use of gearing through this difficult period and understandably are currently using relatively low levels of gearing. They see conditions for companies becoming tougher over the short term, given global geopolitics and the cost of living crisis. However, in their view, risk aversion will fade over the medium to long term and they see their strategy being well-placed to deliver on capital growth and income.

 

Bull

 

  • Good dividend yield higher than benchmark with back-up of strong revenue reserves
  • Income stocks’ defensiveness has resulted in discount narrowing amidst market uncertainty
  • Closed-end structure allows managers to employ dynamic and flexible approach without worrying about overall portfolio liquidity

 

 

Bear

 

  • Small trust size limits institutional investors and liquidity
  • Strong emphasis on ESG but not exclusionary; contains tobacco stocks
  • Gearing can amplify downside

 

See the full research paper here >

 

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This is a non-independent marketing communication commissioned by BlackRock. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Disclaimer

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