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BlackRock Energy & Resources Income | Fuelling the future with flexible approach

BlackRock Energy and Resources Income Trust (BERI) has posted solid NAV and share price total returns in the financial year ended 30 November 2024, outperforming both its AIC peer group and the average for the investment trust universe. BERI – historically a blend of traditional energy and mining stocks – broadened its remit in 2020 to include energy transition plays, with neutral positions of 30% each in conventional energy and energy transition, and 40% in mining. At end-FY24, exposures were broadly in line with these neutral levels – a change from recent years, which have seen the mining sector above 40% while energy transition has been a long-term underweight.

Although traditional energy companies (particularly in the US) have seen a boost from the election of climate change sceptic Donald Trump as president, oil prices remain relatively muted on the back of abundant supply, informing the decision of BERI's managers – Mark Hume (an energy expert) and Tom Holl (a mining specialist) – to maintain their neutral weighting on the sector. Meanwhile, more attractive valuations, coupled with growth opportunities from the buildout of AI infrastructure, have seen the portfolio's exposure to energy transition (and energy efficiency in particular) rise close to a four-year high. While copper remains a favoured subsector in mined commodities, overall mining exposure has declined as China's economic woes continue.

In allocating between the three segments, the team seeks to maximise capital and income returns, and the dynamic and flexible approach is a key factor in limiting volatility over the longer term. As suggested by the trust's name, income is an important consideration, with the vast majority now arising naturally from dividends rather than being created through option writing. While income from special dividends – which had contributed strongly to revenue returns in recent years – has continued to reduce in FY24, BERI has achieved a fourth year of consecutive dividend growth, paying out 4.5p per share (a 3.8% yield based on the current share price), up 1.7% on the previous year. Dividends have historically been fully covered by income, and there is a healthy revenue reserve of around a year's dividend available to supplement any potential shortfall.