North American Income (NAIT ) has raised its dividend target more than 6% to keep shareholders onside as they vote on the future of the underperforming trust in June.

Abrdn’s £386m income-focused fund bolstered its dividend by 6.4% to a fully covered 11.7p per share for the year ending 31 January 2024 as it extended its track record of dividend growth to 13 consecutive years.

Several companies announced double-digit dividend increases over the year, including Citywire AAA-rated ‘Elite’ stocks and semiconductor suppliers Broadcom and Analog Devices, which raised payouts by 14% and 13%, respectively.

Two holdings also paid special dividends: Chicago-based financial services company CME Group, also Citywire AAA-rated, declared a one-off payment of $5.25 per share, while gaming-focused real estate investment trust Gaming and Leisure Properties, an A-rated Citywire Elite stock held by other leading fund managers, paid out a special dividend of 25 cents.

The increase in income for the year should cheer investors, who have suffered modest underperformance from the 4.2% yielder. In the full-year to the end of January, the net asset value (NAV) slipped 1.6%, against a 2.6% return from the benchmark Russell 1000 Value index. The shares ticked 0.9% lower over the year and are currently trading at a 12.5% discount.

The underperformance comes despite a rip-roaring year for US equities but it was concentrated within growth and technology stocks, which typically don’t pay dividends so are not eligible for inclusion in the trust managed by Abrdn’s Fran Radano.

Income-paying stocks also had their problems over the year, and the biggest detractor was the material sector, followed by industrials.

Agricultural sciences company FMC Corporation, a Citywire A-rated producer of crop-protection chemicals, suffered ‘inventory destocking which forced management to materially reduce its guidance’.

‘The weakness was derived from farmers over-ordering crop inputs after being unable to procure supplies in 2022 due to supply-chain disruption,’ said Radano.

Bristol Myers-Squibb, the  AA-rated'>Citywire AA-rated pharmaceutical giant, also underperformed due to a new US government pricing measure and a ‘pipeline that has not yet received full approval for launching new drugs’.

Shareholders will be able to vote with their feet at the June annual general meeting when the trust holds it three-year continuation vote. The fund sits in the middle of its US equity sector over three years, with shareholder returns of 17%. 

Former Lloyds TSB Scotland chief executive Dame Susan Rice, who chairs the trust, said the board believes the trust’s objective is still ‘relevant’ and the ‘history of annual dividend increases since 2011 means that we are included in the Association of Investment Companies’ ‘next generation dividend heroes’ listing and we hope that this progression continues’.

Energy and utility companies were added over the period, with Citywire AAA-rated NextEra Energy – which owns Florida Power & Light Company, the US’s largest regulated electric utility, serving more than 12m people. Essential Utilities made it into the portfolio: it makes two-thirds of its earnings from water and the remainder from has.

‘In the short run, the gas business should grow faster given the infrastructure upgrades required,’ said Radano. ‘However, the water business should grow at a comparable pace over the intermediate term due to several small acquisition opportunities.’

Energy infrastructure company Enbridge, which operates oil pipeline networks in North America, ‘generates predictable cashflows thanks to its regulated and long-term contracts with customers’ and made it into the portfolio.

Radano also made the decision to buy several positions to take advantage of attractive bond valuations as yields pushed higher on monetary tightening and concerns about an economic slowdown reined.

‘The portfolio’s sector exposure is modestly defensive and we continue to seek all-weather companies, where macro tailwinds are not needed for growth,’ he said.