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Investment Trust Insider on Middlefield Canadian Income

Investment Trust Insider on Middlefield Canadian Income

James Carthew: Middlefield – North America with income

Canada tends to get overlooked by investors, dismissed perhaps as a play on resources. Of course, while these are an important part of its economy, there is much more to the country than that. Within the investment companies market, we have two ways of accessing Canadian markets – Canadian & General Investments (CGI) and Middlefield Canadian Income (MCT), the latter I thought I’d look at this week.

Middlefield listed in London in 2006. It is an income fund that currently yields 5.2%. The original idea was to offer UK-based investors access to the Canadian income trust market. Canadian companies were able to gain tax advantages if they streamed their profits to shareholders as dividends. This made sense for companies that generated fairly stable cash flows but, at the time, the idea was being embraced by a range of other businesses.

However, shortly after Middlefield launched, the Canadian government changed the rules. Prices of income trusts fell but Middlefield weathered the storm, maybe because it was offering an attractive yield. Then came the global financial crisis and a fall in oil and other commodity prices. Middlefield was forced to cut its dividend and its shares, which had started life at £1, hit a low of nearly 30p. Its recovery was swift, however, and it has traded at around £1 since early 2011.

Conscious that resource plays were… read more here