Last week, the Chancellor confirmed that the UK is now officially in a recession. Given this, I think high-yield dividend stocks that provide passive income are going to be desirable for the foreseeable future.
One stock that I’m going to be adding to before 2023 is BlackRock World Mining Trust (LSE: BRWM). Launched in 1993, this investment trust manages a portfolio of global mining and metal stocks. There are three things that I specifically like about it.
Safety in numbers
The first thing I like is its diversity. The trust typically has around 50 holdings, across many different commodities and geographical regions.
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This level of diversification makes it less risky than me investing in just, say, Glencore or Rio Tinto. Those two stocks are top positions in the portfolio anyway. This means I still get exposure to their operations and earnings, alongside another 50 or so companies. These include firms extracting rare earth metals necessary for the electrification of energy production and transportation.
The trust has a concentrated portfolio, with the top 10 largest holdings normally making up more than 50% of assets. I like this conviction, as it means the managers are focused on investing in quality rather than quantity.
Competitive advantages
It should be noted that because this is an actively managed fund, there’s an ongoing charge of 0.95% (deducted from received dividends or trust assets). That’s more expensive than a resources-focused tracker fund, which might make readers wonder why I’d be happy to pay more for active management.
Well, there are a few things that I think are worth paying up for. The first is the management of the trust. It has been run by Evy Hambro for over 20 years and he’s been supported by co-manager Olivia Markham since 2015.
That’s over a quarter of a century of experience between the two of them. This stability and long-term stewardship of the trust gives me peace of mind and differentiates it from rivals.
Secondly, it’s backed by the BlackRock natural resources team, which is the the largest in the world by assets. I think this level of experience and expertise is also a great advantage.
And thirdly, the trust has the ability to invest up to 20% of assets in private companies. These unlisted investments have the chance to grow much more quickly, turbocharging the returns.
One recent example of this is US electric metals firm Ivanhoe Electric. The trust invested in the company when it was private and nearly doubled its money after Ivanhoe Electric went public.
Solid track record
The stock has been a massive winner, with a total return of 132% over five years. That performance is comfortably ahead of equivalent index funds. The stock has a dividend yield of around 6%, and the payouts have trended upwards over a long period of time.
One ever-present risk is the possibility of portfolio holdings unexpectedly cutting their dividends. Rio Tinto, for example, recently cut its first-half dividend by more than 50%.
Even so, the trust has cash kept in reserves to pay shareholders were this to happen. All in all, I’m happy to add more shares before the year is out.
