Fund Profile

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Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by BlackRock Income & Growth. 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.

Overview
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Overview

BlackRock Income & Growth (BRIG) has twin aims of providing a rising dividend, but also growth in capital over the long term. Whilst BlackRock has only been running the trust since 2012, the team behind it has a much longer pedigree. They have run the same investment process for over 30 years, and (according to BlackRock) the BlackRock UK Income fund holds the impressive record of being the only UK OEIC that has increased its distribution each year for 30 years.

Speaking to co-manager Adam Avigdori recently, he commented on how well suited the trust structure was to their approach. He highlighted that a closed-end fund puts a manager in an ideal position to take controlled risk, and allows them to have strongly held views through a cycle. He feels this aids their investment approach, and together with the relatively small size of the trust currently (£46m of net assets) gives them a competitive advantage over peers, with huge flexibility to buy or sell companies of all sizes. As such, Adam believes BRIG is an ideal vehicle to deliver dividend growth for investors. As we discuss below, since 2012 the team have grown the trust’s dividend by 4.7% a year and built up a reserve equal to a year’s dividend.

Adam and David employ a high-conviction approach to stock picking, with the portfolio expected to have between 30 to 60 holdings at any one time - currently numbering 43. The team buy companies purely on an opportunity led basis, but try to provide some diversification across the portfolio through allocating across three “buckets”, defined by the broad type of investment opportunity. Yield and free-cashflow is typically expected to be the biggest allocation, of between 60-80% of the portfolio, currently 68%. The team also look for growth opportunities, expected to be between 10-30% of the portfolio, currently 23%. The final bucket is turnaround situations, expected to be between 0-10%, currently 9%.

A key differentiator to many other competitor funds and/or trusts is the multi-cap approach. Using the advantages conferred by the closed end structure and the relatively small size of the trust, the team opportunistically venture into the small and mid-cap (SMID) sphere where they have particularly high conviction – with no official maximum weighting. Currently c.18% of the portfolio is in SMID stocks, mostly found in the growth bucket of the portfolio.

Performance over the past five years is impressive, with the trust c.8% ahead of the benchmark but also beating the average investment trust peer by 4.6% and the average open-ended peer by 10.6%. 2014 and 2015 were both very strong years of outperformance, but 2016 proved to be a more difficult environment – with miners rallying hard – an area which the managers have had a long term underweight. Over the past 12 months (to 23 May 2019), BRIG is behind the FTSE All Share by 0.6%. Several stock specifics impacted the portfolio last year, which have so far more than been made up for by calendar year performance to date.

Outside of total returns, BRIG’s raison d’etre is to provide a growing dividend over time. As such, since being awarded the mandate in 2012, the BlackRock team have grown the trust’s dividend by 4.7% a year and built up a reserve equal to a year’s dividend. The trust’s headline yield of 3.7% is modestly lower than the UK Equity Income sector weighted average of 3.9% (source: JPM Cazenove). This reflects the manager’s desire to deliver sustainable dividend growth over time, which is evidenced by the impressive earnings growth delivered by the portfolio since BlackRock took over management of 7.7% pa.

The board has been employing an active discount control mechanism for over five years, and the discount currently stands at a historically wide level of 5.6%. Over time, discount volatility has been relatively low, with the trust’s discount having been broadly in-line with the UK Equity Income sector.

Kepler View

BRIG remains a hidden gem for income investors, evidenced by the team's resolute focus on earnings growth and free cashflow, and their strong performance relative to peers and the benchmark over five years.

The sustainability of dividend growth is illustrated by the trust’s earnings per share growth of 7.7% per annum since they were awarded the mandate, significantly outpacing the growth in dividends of 4.7% pa. As a result, the board continues to have room for manoeuvre in paying dividends should the portfolio suffer a short-term earnings shock.

The team employ a true stock-picking approach, and use the advantages of the investment trust structure to help them achieve their objectives - including using opportunistic investments in small and mid cap stocks, and a dynamic approach to gearing. At the same time, the board has an active discount control policy, which results in low discount volatility and a liquidity profile which is much better than the trust's size would suggest.

BULL
BEAR
Strong earnings growth since managers awarded mandate
Lower yield than average of peers
Disciplined investment process, with fully resourced team
Current small size of trust means higher OCF than peers
Low discount volatility

Continue to Portfolio

Fund History

17 Jan 2022 Results analysis: BlackRock Income & Growth
BRIG’s managers are seeing a faster recovery in dividends than they expected…
24 Dec 2021 Fund Analysis
BRIG’s long term dividend attractions remain undiminished…
28 Sep 2021 Fund Analysis
BRIG’s substantial revenue reserves should continue to support dividend growth…
21 Sep 2021 Does the UK market still have potential?
The UK has had a strong start to the year, a welcome relief after a tough few years. David Goldman, Co-Manager on the BlackRock Income and Growth Investment Trust says that there is more to come from UK companies.
06 Apr 2021 The UK post-pandemic revival
The UK is back on its feet after a tough pandemic and protracted Brexit negotiations, says David Goldman, Co-Manager of the BlackRock Income and Growth Investment Trust plc.
05 Feb 2021 Results analysis: BlackRock Income and Growth
BlackRock Income and Growth has delivered strong returns since its year end and is well placed to perform in 2021 with a resilient, high quality portfolio and solid reserves supporting its 4% yield…
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
07 Jan 2021 Fund Analysis
BRIG has substantial revenue reserves to support dividend growth...
04 Aug 2020 Resilient income in tough times
David Goldman and Adam Avigdori, Co-Managers of the BlackRock Income and Growth Investment Trust plc, believe these are tough times for dividend seekers in the UK, but active management can help navigate this difficult environment...
30 Jul 2020 Fund Analysis
BRIG aims to provide investors with a rising dividend, as well as capital growth over the long term...
15 Apr 2020 Hold fast
Investment trusts' revenue reserves could make them a vital stronghold for investors facing UK dividend cuts of as much as 47%....
03 Feb 2020 Sustainable financial returns for long-term growth
ESG considerations are becoming more important for investors. Adam Avigdori, Co-Manager of the BlackRock Income and Growth Investment Trust plc, discusses how they draw ESG analysis into their investment process...
12 Dec 2019 Regime change: how manager changes impact performance
Does a change in manager result in improved trust performance?
11 Dec 2019 Fund Analysis
BRIG aims to provide investors with a rising dividend, as well as capital growth over the long term...
05 Dec 2019 Holding something in reserve
A sterling bounce poses a threat to UK dividends - we look at how UK equity income investment trust managers stand prepared…
17 Jul 2019 Ready for action
In the second part of our active management series, we assess the most active managers across the major closed-ended equity sectors…
05 Jun 2019 Fund Analysis
BlackRock Income & Growth (BRIG) aims to provide investors with a rising dividend, as well as capital growth over the long term...
28 Dec 2018 Ingredients for change
The UK market has only been cheaper twice in the last century; and on both occasions the world was at war...
03 Oct 2018 We can be heroes
Our analysis has uncovered the trusts which have generated a solid income through thick and thin - without compromising other aspects of performance...
03 Oct 2018 Fund Analysis
BlackRock Income & Growth (BRIG) aims to provide investors with a rising dividend, as well as capital growth over the long term...
13 Jun 2018 Still waters run deep
UK equity income trusts trade at a discount to their global-equity-income-focused counterparts, yet our research suggests this could be unjustified...
23 May 2018 Fund Analysis
A UK equity income trust that uses a total return investment philosophy, aiming to consistently grow the dividend as well as capital
24 May 2017 Fund Analysis
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