Diverse Income Trust plc (LON:DIVI) continues to be among the top-ranked UK high-dividend-yield trusts, despite some setbacks in short-term performance against peers due to its relatively high small-cap and AIM exposures. These segments of the UK market underperformed over the past 12 months. Portfolio managers Gervais Williams and Martin Turner are confident about both DIVI’s short- (should the global and UK equity markets continue to rally in H222) and long-term performance catch-up relative to peers and indices. They expect the multi-cap income approach will continue to deliver returns ahead of the market, and for the UK equity market to outperform the United States.
We believe DIVI is well positioned to outperform indices and peers over the long term, given its income-generating multi-cap strategy and diverse sources of income. DIVI’s strategy and the portfolio’s diversification (c 130 holdings) mean the trust’s portfolio has not changed significantly throughout its life. In 2021 and H122, as the AIM market underperformed the broader UK market, DIVI’s performance lagged larger cap dominated peers with a -13.7% 12-month NAV TR versus -3.9% for peers. Given the increased risks of a recession, the recently purchased UK large-cap equity index put option covering the period to December 2023 (replacing the one expiring in December 2022) should enable DIVI to withstand (and even benefit from) any potential market correction.
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