BlackRock ESG Capital Allocation Term Trust (ECAT) Announces Increase to Distribution Under Managed Distribution Plan
- 20% increase in monthly distribution amount per share aligning with total return
- 32.3% return on market price and 18.1% on net asset value in 2023
- Total distributions paid since inception: $286,954,787 ($2.775 per share)
- 3,814,731 shares repurchased, totaling $54,526,808 and $10,776,340 NAV accretion
- None.
Insights
The increase in monthly distribution per share by BlackRock ESG Capital Allocation Term Trust (ECAT) is a strategic move to align the distribution rate with the Trust's total return. The reported returns of 32.3% on market price and 18.1% on net asset value (NAV) are robust indicators of the Trust's performance, particularly when considering the broader market context. The distribution increase, coupled with a 50% total increase since inception, can make the Trust more attractive to income-focused investors. However, the sustainability of such distributions should be scrutinized, especially since a significant portion (87%) is attributed to the return of capital rather than net income, which could indicate that the Trust is returning part of investors' principal back to them, potentially eroding the asset base over time.
BlackRock's ECAT's performance metrics, such as the annualized total return since inception, provide insight into the Trust's efficiency in capital allocation, especially within the ESG (Environmental, Social and Governance) investment space. ESG funds have been under the microscope recently, with investors demanding transparency and tangible results. ECAT's performance could be reflective of successful ESG investment strategies, which could set a precedent in the market. However, the market price return outpacing NAV return could indicate market sentiment being more optimistic than the intrinsic value growth, a factor that investors should monitor closely.
It is important for investors to note the tax implications of the distributions, particularly the high return of capital component. While the return of capital can provide tax benefits, as it is not taxed until the investment is sold and reduces the cost basis, it also suggests that the Trust may not be generating enough income to cover distributions. This could have implications for the Trust's ability to sustain distributions without eroding NAV. Furthermore, compliance with Section 19 of the Investment Company Act of 1940 ensures transparency in distribution sources, which is critical for shareholder awareness and tax planning.
This change was made in order to better align ECAT’s distribution rate with its total return. ECAT returned
This is the second distribution increase since the Trust’s inception on September 27, 2021, after previously announcing a
BlackRock and the Board of Trustees of ECAT (the “Board”) are committed to enhancing shareholder value:
Total increase in monthly distribution since inception2: +
Total distributions paid since inception3:
Share repurchases since inception4:
Number of Shares
|
Total Amount of Shares
|
Total Amount of NAV
|
3,814,731 |
|
|
For an update on performance and ECAT’s portfolio see the latest Trust commentary and fact sheet: ECAT Quarterly Commentary | ECAT Fact Sheet
Distribution details:
Declaration: 1/2/2024 Ex-Date: 1/11/2024 Record: 1/12/2024 Payable: 1/31/2024
Trust |
NYSE
|
Annual Distribution
|
New
|
Change in
|
New
|
BlackRock ESG Capital Allocation Term Trust** |
ECAT |
|
|
+ |
|
1: Source: Morningstar as of 12/31/2023. Returns are shown net of advisory fees paid by the Trust and net of the Trust’s operating fees and expenses. Past performance is not indicative of future results.
Trust Performance
1-Year Total Return
|
Since Inception Annualized Total
|
|
Total Return (NAV) |
|
|
Total Return (Market Price) |
|
- |
2: Source: BlackRock as of 1/2/2024. This is calculated by taking the difference between the latest declared distribution (
3: Total amount of distribution paid by the Trust since inception on 9/27/2021. ECAT’s estimated source of distributions paid during the current fiscal year to date is
4: Share repurchase data is provided by BlackRock as of 9/30/2023 and reflects share repurchases since the Trust's inception. The amount and timing of any repurchases under the Trust’s Repurchase Program will be determined at the discretion of the Trust’s management. There is no assurance that the Trust will repurchase shares in any particular amounts. The Trust’s repurchase activity will be disclosed in its shareholder report for the relevant fiscal period. Any repurchases made under the Trust’s Repurchase Program will be made on a national securities exchange at the prevailing market price, subject to exchange requirements and certain volume and timing limitations and other regulations under federal securities laws.
*Based on NAV as of 12/14/2023.
** In order to comply with the requirements of Section 19 of the Investment Company Act of 1940, as amended (the “1940 Act”), the Trust posted to the DTC bulletin board and sent to its shareholders of record as of the applicable record date a Section 19 notice with the previous distribution payment. The Section 19 notice was provided for informational purposes only and not for tax reporting purposes. This information can be found in the “Closed-End Funds” section of www.blackrock.com. As applicable, the final determination of the source and tax characteristics of all distributions in 2023 will be made after the end of the year.
*** Distribution rate is calculated by annualizing the Trust’s latest declared regular distribution on 1/2/2024 and dividing that number by the Trust’s market price as 12/31/2023. The distribution rate is calculated net of expenses.
ECAT has adopted a managed distribution plan (the “Plan”) to support a level monthly distribution of income, capital gains and/or return of capital. The fixed amounts distributed per share are subject to change at the discretion of the Board. Under its Plan, the Trust will distribute all available investment income to its shareholders, consistent with its investment objectives and as required by the Internal Revenue Code of 1986, as amended. If sufficient investment income is not available for a monthly distribution, the Trust will distribute long-term capital gains and/or return of capital in order to maintain its stated fixed annual distribution rate under the Plan.
The Trust’s estimated sources of the distributions paid this month and for its current fiscal year are as follows:
Estimated Allocations as of December 31, 2023
Trust |
Distribution |
Net Income |
Net Realized Short-
|
Net Realized Long-
|
Return of Capital |
ECAT1 |
|
|
|
|
|
Estimated Allocations for the Fiscal Year through December 31, 2023
Trust |
Distribution |
Net Income |
Net Realized Short-
|
Net Realized Long-
|
Return of Capital |
ECAT1 |
|
|
|
|
|
1The Trust estimates that it has distributed more than its income and net-realized capital gains in the current fiscal year; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the shareholder’s investment is paid back to the shareholder. A return of capital distribution does not necessarily reflect the Trust’s investment performance and should not be confused with ‘yield’ or ‘income’. When distributions exceed total return performance, the difference will reduce the Trust’s net asset value per share.
The amounts and sources of distributions reported are only estimates and are being provided to you pursuant to regulatory requirements and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Trust’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Trust will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
Trust Performance and Distribution Rate Information:
Trust |
Average annual total
|
Annualized current
|
Cumulative total return
|
Cumulative fiscal year
|
ECAT* |
|
|
|
|
* Trust launched within the past 5 years; the performance and distribution rate information presented for the Trust reflects data from inception to 11/30/2023.
Shareholders should not draw any conclusions about the Trust’s investment performance from the amount of the Trust’s current distributions or from the terms of the Trust’s Plan.
The amount distributed per share under the Plan is subject to change at the discretion of the Trust’s Board. The Plan will be subject to ongoing review by the Board to determine whether the Plan should be continued, modified or terminated. The Board may amend the terms of the Plan or suspend or terminate the Plan at any time without prior notice to the Trust’s shareholders if it deems such actions to be in the best interest of the Trust or its shareholders. The amendment or termination of the Plan could have an adverse effect on the market price of the Trust’s shares.
For more information on BlackRock’s closed-end funds, please visit www.blackrock.com/CEF
Investing involves risk, including possible loss of principal.
This document and the information contained herein relates solely to BlackRock ESG Capital Allocation Term Trust (ECAT). The information contained herein does not relate to, and is not relevant to, any other Trust or product sponsored or distributed by BlackRock or any of its affiliates. This document is not an offer to sell any securities and is not a solicitation of an offer to buy any securities.
Carefully consider the Trust’s investment objective, risk factors and charges and expenses before investing. This and other information can be found in the Trust’s shareholder report which may be obtained by visiting the SEC Edgar database. Read the shareholder report carefully before investing.
This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change.
There is no assurance that the Trust will achieve its investment objective. The Trust is subject to numerous risks, including investment risks. The Trust is not a complete investment program and you may lose money investing in the Trust. An investment in the Trust may not be appropriate for all investors.
About BlackRock
BlackRock’s purpose is to help more and more people experience financial well-being. As a fiduciary to investors and a leading provider of financial technology, we help millions of people build savings that serve them throughout their lives by making investing easier and more affordable. For additional information on BlackRock, please visit www.blackrock.com/corporate
Availability of Trust Updates
BlackRock will update performance and certain other data for the Trust on a monthly basis on its website in the “Closed-end Funds” section of www.blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to check the website for updated performance information and the release of other material information about the Trust. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Trust and does not, and is not intended to, incorporate BlackRock’s website in this release.
Forward-Looking Statements
This press release, and other statements that BlackRock or the Trust may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to the Trust’s or BlackRock’s future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions.
BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.
With respect to the Trust, the following factors, among others, could cause actual events to differ materially from forward-looking statements or historical performance: (1) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for the Trust or in the Trust’s net asset value; (2) the relative and absolute investment performance of the Trust and its investments; (3) the impact of increased competition; (4) the unfavorable resolution of any legal proceedings; (5) the extent and timing of any distributions or share repurchases; (6) the impact, extent and timing of technological changes; (7) the impact of legislative and regulatory actions and reforms, and regulatory, supervisory or enforcement actions of government agencies relating to the Trust or BlackRock, as applicable; (8) terrorist activities, international hostilities, health epidemics and/or pandemics and natural disasters, which may adversely affect the general economy, domestic and local financial and capital markets, specific industries or BlackRock; (9) BlackRock’s ability to attract and retain highly talented professionals; (10) the impact of BlackRock electing to provide support to its products from time to time; and (11) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions.
Annual and Semi-Annual Reports and other regulatory filings of the Trust with the Securities and Exchange Commission (“SEC”) are accessible on the SEC's website at www.sec.gov and on BlackRock’s website at www.blackrock.com, and may discuss these or other factors that affect the Trust. The information contained on BlackRock’s website is not a part of this press release.
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Source: BlackRock Closed-End Funds
FAQ
What is the latest increase in ECAT's monthly distribution amount per share?
What was ECAT's return on market price and net asset value in 2023?
How much have been the total distributions paid since ECAT's inception?
How many shares have been repurchased by ECAT since inception?
