Alpha generation and low correlation of Diverse Income Trust plc (LON:DIVI) with major UK indices has resulted in a steady long-term total return. After celebrating its 10-year anniversary last year, multi-cap DIVI continues to be among the top-ranked UK high dividend-yield trusts over periods longer than three years, despite some setbacks in short-term performance against peers due to its relatively high AIM exposure. About a third of DIVI’s portfolio is in AIM-listed stocks, while most peers are more exposed to large caps. Looking ahead, portfolio managers Williams and Turner expect their multi-cap income approach to continue to deliver over the medium to long term, and for the UK equity market to outperform the US.
Diverse Income Trust’s multi-cap strategy and the portfolio’s diversification (c 130 holdings) mean the trust’s portfolio stance has not changed significantly either during the pandemic or throughout its life. The trust has delivered attractive returns on the still dominating high-beta markets of the past decade. In 2021, as the AIM market underperformed the broader UK market, DIVI’s performance lagged peers. DIVI’s 14% NAV TR over the 12 months to end-January 2022 was below the peer group average of 20%. Whether or not the UK stock market recovers, we expect DIVI to capture extra returns amid a potential market shift from growth to value as global growth slows. High equity valuations took a hit at the start of 2022. If they continue to unwind, Diverse Income Trust is well positioned to outperform indices and peers, given its income-generating multi-cap strategy and diverse sources of income.
