kepler canada mct stable

MCT: stable income from an overlooked equity market…

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  • MCT: stable income from an overlooked equity market…


Middlefield Canadian Income (MCT) offers investors exposure to Canadian equities, a market very different in composition to its southern neighbour, with financials, utilities and energy dominating, meaning that Canadian equities offer diversification from the tech-heavy S&P 500. Canada also has an equity-income culture more akin to the UK, and MCT offers investors a current dividend yield of 5.4%.

MCT’s most significant overweight has consistently been Canadian REITs, with a c. 25% exposure being about four times the benchmark. Manager Dean Orrico says that REITs continue to trade at discounts rarely seen during the 30 or so years since the REIT structure was introduced in Canada. But supply constraints and strong demand mean that underlying REIT earnings have been stable or grown even as discounts have remained wide for an extended period.

Dean has managed MCT since its IPO in 2006 alongside his colleague Rob Lauzon. He has been with Middlefield since 1996 and has over 35 years of investment experience. He also manages a specialist fund of REITs and is president and CEO of Middlefield Group. Dean has recently increased his personal stake in the trust as a sign of his growing conviction about MCT’s recovery potential. Furthermore, MCT’s gearing has recently increased to c. 21%, the top of the normal expected range for gearing, as the team’s conviction has increased.

MCT has a track record of stable and growing dividends and following a post-pandemic recovery in underlying earnings, the trust’s board slightly increased the dividend in 2023, and again in 2024, raising the target quarterly payment for the year ending 31/12/2024, giving MCT a yield of 5.4%.

Analyst’s View

Recent share purchases illustrate their conviction that there is very significant value in MCT’s portfolio, and in its discount. This is also evidenced by the trust’s gearing, which, at 21%, is at the upper end of its historical range. The team anticipates a soft landing for the Canadian economy, and highlights the recovery potential of the relatively high yielding equity market as a result.

Two themes that run through the portfolio are supply constraints and operational efficiency. Real estate is supply constrained within a growing population; new energy pipelines are hard to build and exploration for new sources of fossil fuels is expensive. As a result, many of MCT’s companies are focused on operational efficiency and growing dividends for shareholders. Similarly, Canadian banks have built a reputation for conservative balance sheets and have weathered the higher-interest-rate environment well. The team have recently moved to increase the trust’s weighting in the sector in anticipation of improving sentiment as the credit cycle eases.

MCT’s Dividend target was increased for the year ending 31/12/2024, following an increase in 2023, with dividends back to full cover following a dip in earnings during the pandemic. MCT’s dividend yield of 5.4% compares to the current yield on Canadian government bonds of c. 3.25%, a decline from 3.7% when we last met up with Dean at the end of the summer in 2023. This highlights how attractive the yield is at the current c. 19% discount.


  • Strong recovery potential from large overweight in REITs
  • A soft landing and cuts in interest rates for Canada look increasingly likely
  • Wider than average discount


  • Relatively high gearing for an equity income trust, which could amplify losses as well as gains
  • Fossil fuel exposure may not suit all investors
  • Performance is behind the benchmark, albeit significant active positions have recovery potential





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  • MCT: stable income from an overlooked equity market…
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