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Fund Profile

BlackRock Sustainable American Income 04 April 2024

Disclaimer

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.

Overview
BRSA's portfolio trades at a significant P/E discount to the US market and is defensively positioned...
Overview

BlackRock Sustainable American Income (BRSA) is a value-focused portfolio of largely US-listed stocks, with an explicit ESG mandate. BRSA also makes full use of its ability to invest in non-US stocks when comparable valuations make for an attractive alternative, with for example Shell currently a top-ten holding in the holding in the trust, both on valuation grounds and on ESG grounds, which is explored in the ESG section.

The team’s focus on value sets the trust apart from many of its peer group and the wider US funds’ universe. Over the last five years BRSA has performed in line with its reference index, the Russell 1000 Value Index, but value investing has lagged the wider market and BRSA has lagged the Morningstar North American investment trust peer group, which is on average more growth-orientated than BRSA. This has led to a very wide gap in valuation between BRSA's portfolio, on an average P/E of c. 12x and the S&P 500 Index on c. 19x. The very narrow range of stocks that drove the S&P 500 Index's performance in 2023 has exacerbated this gap, and the team have identified a number of sectors on historically low valuations, notably healthcare.

BRSA currently yields 4.3%. Since 2018, BRSA has paid a dividend totalling 8.0p each year, and for the current financial year ending 31/10/2024 the board has guided investors to expect the same. Dividends are paid from a mixture of revenue and distributable reserves.

BRSA currently trades on a c. 12% discount. Having historically traded at a narrower-than-average discount for the peer group, it recently widened towards the peer group average and the board has increased the rate of share buy-backs in response. With the team currently taking a defensive stance within the portfolio, the trust is currently ungeared awaiting an opportune period to re-apply leverage to the portfolio.

Analyst's View

Many investors were caught on the wrong side of the 'magnificent seven' trade in 2023, which saw a very narrow group of large-cap technology-focused stocks in the US drive the overall market's performance to an unusual extent. It's writ large that BRSA's value-based approach means that it was never likely to own these stocks, and as the team point out, the overall valuation on the US market is now at what they consider to be quite a stretched level, even as many stocks continue to trade at attractive valuations, with BRSA’s portfolio's average P/E at 12x compared to the S&P 500 Index's 19x. BRSA's value approach did identify some winners last year, with Cognizant Technology Solutions and Cardinal Health. Cognizant, an IT services company, trades at a large discount to its closest peers. Cardinal Health, a healthcare services and products company that specialises in the distribution of pharmaceuticals and medical supplies, has seen some recent management changes that the team view as a positive to further drive value.

Investors wondering whether the US equity market cares about dividends could do worse than examine the positive share-price reaction of Meta upon its recent announcement that it would commence paying a dividend. Meta isn’t in BRSA’s portfolio on valuation grounds, but we think it is perhaps an interesting juncture for the US market. BRSA's own portfolio has a yield of 2.5% and an historical dividend growth rate of c. 9%, higher than the S&P 500 Index's yield of 1.7% and growth of c. 5%. Long-term, valuation and dividend growth can really matter for equity returns, and while the abovementioned Meta's dividend yield is fractional in comparison to its market cap, perhaps this marks an interesting moment for US investors to re-appraise the value of a dividend policy? We think BRSA could perform well in such a scenario.

Bull

  • Portfolio at a significant P/E discount to US equities
  • Consistent record of dividend paying
  • Shares currently trading on wider-than-average discount

Bear

  • The value style has remained out of favour in 2023
  • Dividend has not grown since 2018
  • Some investors may prefer 100% North American exposure
Continue to Portfolio

Fund History

04 Apr 2024 Fund Analysis
BRSA's portfolio trades at a significant P/E discount to the US market and is defensively positioned...
08 Feb 2024 Results analysis: BlackRock Sustainable American Income
BRSA's reference index, the Russell 1000 Value Index, is at an historical low in valuation terms...
10 Nov 2023 LATAM rate cuts and central bank gold buying
We take a look at some of the highlights of our BlackRock event…
03 Nov 2023 The inflation reduction act: one year on
The US’s vast climate change legislation programme is a year old. The team managing the BlackRock Sustainable American Income Trust says the Act is driving innovation in new transition technologies...
31 Oct 2023 BlackRock Sustainable American Income
Steve Farkas
Rewatch this webinar which was part of our October and November online event 'The Best of BlackRock'...
Watch Recording
06 Sep 2023 You should be dancing…
North America should be a core part of any portfolio…
07 Jun 2023 Under pressure
We identify the equity trusts which have delivered the best downside protection in recent years...
19 May 2023 The year ahead in US stock markets
Markets may have seen a short-lived rally in the latter part of 2022, but with tough economic conditions ahead, it is important to focus on those companies that can sustain their earnings, says Lisa Yang, manager of the BlackRock Sustainable American Income trust plc...
20 Apr 2023 Fund Analysis
BRSA: with a repeat of the last ten years of stock market behaviour seemingly unlikely, could value and sustainability come to the fore..?
31 Jan 2023 Results analysis: BlackRock Sustainable American Income
BRSA’s value-based investment style shows defensive qualities in difficult market conditions…
22 Sep 2022 Fund Analysis
BRSA’s ESG-conscious approach to US value investing has generated positive near-term returns despite the market rout…
07 Sep 2022 American muscle
Beating US indices is a monumental task. We examine the closed- and open-ended North American sectors to see how they have fared…
27 Jul 2022 Has the comeback begun?
Our analysts debate whether the market has fully priced in the current inflation and looming recession…
13 Jul 2022 Ready player one
We wonder where, if anywhere, should investors look for returns after a tumultuous first half of the year…
13 May 2022 Time to reappraise the ‘value’ approach?
After a tough decade, the environment for the value approach is improving, says Lisa Yang, Co-Manager of the BlackRock Sustainable American Income Trust plc. Is it time for investors to take note?
27 Apr 2022 Finding value in a haystack
Non-income value strategies are becoming increasingly scarce, but the holdouts represent attractive near-term opportunities…
25 Mar 2022 Slides and Audio: BlackRock Sustainable American Income
Download the presentation and listen to the audio from our 'Ideas for your ISA' virtual Spring event on 15 March...
23 Mar 2022 Fifteen ideas for your ISA
Slides and audio from our event last week, featuring fund managers running money in every major market in the world...
23 Feb 2022 Regime change
Ahead of our spring conference, we ask whether investors need to junk their portfolios and start again…
17 Feb 2022 Results analysis: BlackRock Sustainable American Income
Reporting results for the year ending 31 October 2021, BRSA has succeeded in combining sustainable investing with an outperforming value-stock bias…
15 Dec 2021 Fund Analysis
BRSA’s new sustainable approach to US value investing represents a highly distinct strategy…
08 Dec 2021 We are the (ESG) champions
Investment trusts tend to be amongst the best-performing ESG strategies in the combined open- and closed-ended universe…
24 Nov 2021 Holding back the tears
While the final text of COP26 fell short of what many had hoped for, the writing is on the wall for fossil fuels and, from an investment perspective, the age of sustainability has only just begun…
17 Nov 2021 How Do You Like Them Apples
Judging whether the US market is expensive is not as easy as many make it out to be…
03 Nov 2021 Don't fear the reaper
With market direction hard to call, we consider the case for taking a long-term view in the investment trust sector…
20 Oct 2021 Board games
Investment trust boards talk a good game about championing shareholders interests - but do they really deliver?
28 Jul 2021 How are the mighty fallen
Dividend culture as we knew it is dead, according to Kepler's David Johnson, but investment trusts offer a solution...
20 Jul 2021 Fund Analysis
Proposed shifts in BRNA’s strategy towards sustainable investing may improve its return profile and be the catalyst for a narrowing discount….
22 Apr 2021 FAANGs for the memories
The massive outperformance of mega-cap tech last year could become a thing of the past if anti-trust legislation and negative sentiment starts to bite...
12 Feb 2021 Results analysis: BlackRock North American Income
With a strong start to the year, BRNA has a number of catalysts to drive performance in 2021 and an attractive yield of 4.7%...
07 Jan 2021 Fund Analysis
BRNA offers a disciplined US value opportunity with superior income attributes…
19 Nov 2020 Hope springs eternal
The US election has given long-suffering value investors new hope of a 'great rotation' in their favour, but that light at the end of the tunnel could in fact be a train…
01 Oct 2020 Alternatives for Income Investors
Slides and audio from our event focused on alternative routes to a reliable income…
30 Sep 2020 Slides and Audio: BlackRock North American Income
View the presentation and listen to the audio from our 'Alternatives for Income Investors' event on 29 September...
20 Aug 2020 Alternatives for income investors
In a world where dividend are under unprecedented pressure, our income focused online event in September should provide serious food for thought…
09 Jul 2020 Fund Analysis
BRNA offers a 5% yield from a portfolio of high quality US companies…
18 Jun 2020 Gimme shelter
As income investors brace for impact we ask which regions and trusts are less likely to cut their dividends in 2020…
27 Apr 2020 What does defensive investing mean today?
As investors reflect on the damage inflicted by the coronavirus outbreak on their portfolios in recent weeks, they may be looking for a way to build in greater resilience. However, traditional defensive investment strategies may not be the answer...
13 Feb 2020 Choose your own adventure
Predicting the future is impossible, but identifying which trends have coincided in the past can give us clues about what may be to come...
31 Dec 2019 Fund Analysis
Since a management change in 2014, BRNA has been one of the great turnaround stories...
12 Dec 2019 Regime change: how manager changes impact performance
Does a change in manager result in improved trust performance?
25 Sep 2019 Where next for the US stock market?
12 Jun 2019 Fund Analysis
In the current volatile environment, this trust appears a stand out candidate for more cautious investors...
31 Oct 2018 Fund Analysis
A diversified portfolio comprised mainly of US equities, BRNA produced almost double the return in NAV terms of the Russell 1000 Value index in 2017, and has comfortably outperformed the benchmark so far in 2018...
31 Oct 2018 The Trump effect
Two years after the shock election of Donald Trump, we take a look at what the Trump administration has really meant for US markets and the trusts that invest in them...
26 Apr 2018 The $23.9 trillion dollar question*
Are US equities, which have hit record highs on 71 occasions in the last 12 months, overpriced or are they actually trading at a price worth paying?
26 Apr 2018 Fund Analysis
A large cap portfolio, focused on high quality companies, positioned for an inflationary environment with significant exposure to banks
16 Jan 2018 Fund Analysis
A large cap US equity portfolio offering a stronger yield than most of its peers, positioned for an inflationary environment...
28 Jun 2017 What does the future hold for US markets?
As the 45th president of the United States settles into the role, BlackRock North American Income Trust co-manager Tony DeSpirito talks about the future for the North American markets in the wake of a new political and economic environment.
27 Jun 2017 What's driving frontier markets?
Can political and economic reforms make a difference when it comes to looking for growth?
15 Jun 2017 Signs of continental shift
BlackRock's Stefan Gries explains what's driving opportunities in Greater Europe...
13 Jun 2017 Fund Analysis
An income-orientated US equity trust with a decent track record of outperformance since its change in strategy...
12 Jun 2017 Right place, right time
BlackRock's David Zhao and Franco Tapia explain how 2016 was a year of two halves for the US stock markets as the prospect of a return to growth improved the fortunes for certain market sectors.
08 Jun 2017 The long game
Highlights from BlackRock Income & Growth's annual general meeting...
05 Jun 2017 Emerging Opportunities
BlackRock's Chris Colunga discusses the advantages of emerging European countries...
View all

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