Diverse Income Trust plc (LON:DIVI) has announced its Factsheet for the month ended 29 February 2024.
Manager commentary
During the globalisation decades, the capital appreciation of companies focussed on growth has greatly outpaced the return generated by companies paying good and growing dividends. This has been especially apparent in the small companies listed on the UK stock exchange that pay an income. As capital has been withdrawn from the large UK companies, their valuations have fallen, although this has been moderated by international buyers. Where capital is withdrawn from small UK companies however, they are of little interest to international investors and hence their valuations can fall very considerably.
Over recent years, the compromises that come with globalisation have become more apparent. Global electorates have started to vote for nationalistic policies, which sometimes lead to additional geopolitical risk (the potential political, economic, military, and social risks that can emerge from a nation’s involvement in international affairs). During crises, we believe cash generative companies have many advantages.
Whilst the very largest international companies known as mega-caps may have outperformed again during 2023, the mood change in electorates appears to be well established, so conditions that favour cash generative companies such as those of the UK may be set to become persistent. In time, we believe the valuation of the UK stock market will rise compared with others, even the US. We also anticipate the new trend will favour the small UK-quoted companies disproportionately.
So, whilst we believe the share prices of many portfolio holdings are very overlooked at present, the important feature is that most continue to trade well. Take ME Group International for example. It’s a business that installs large capacity washers and dryers in supermarket car parks, that are increasingly useful to households that let out rooms or annexes on airbnb. During February, ME Group International
announced good figures and increased its final dividend from 3.0p last year to 4.42p this year, which
prompted a step up in its share price
Diverse Income Trust plc invests primarily in quoted or traded UK companies with a wide range of market capitalisations, but a long-term bias toward small and medium sized companies.
