Middlefield Canadian Income (MCT)

21/09/2023

Results analysis from Kepler Trust Intelligence

Middlefield Canadian Income (MCT) has published its results for the half-year period ending 30/06/2023. The trust saw a total return on net assets of -3.3%, compared to a 0.4% return on the trust's benchmark, the S&P/TSX Composite High Dividend Index. Since inception in 2006, MCT has produced an annualised NAV total return of 6.9%, compared to the TSX Composite Index's return of 6.2% over the same period.

The trust has a large overweight position to real estate, which was approximately 24% of NAV at the end of August, compared to c. 5% in the benchmark. Canadian REITs have been trading at some of the widest discount levels of the past two decades, only reaching the same level during the financial crisis and more recently during the pandemic.

We see MCT's REIT holdings as a primary driver of performance. Canada has seen comparatively lower levels of inflation, with the most recent CPI print coming in at 3.3%. MCT manager Dean Orrico has also argued that Canada is at the end of the rate hiking cycle. Should that prove to be true, then the trust's REIT holdings are well-positioned to benefit.

We think MCT is likely to appeal to anyone looking for stable, reliable income, combined with capital growth. Assuming we do not see any unexpected spikes in inflation, then this may ultimately prove to be an attractive entry point, with REIT discounts narrowing in the underlying portfolio and MCT shares providing some additional upside by mirroring that process.

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