Diverse Income Trust plc (LON:DIVI) fund managers Gervais Williams & Martin Turner commented:
The second half of 2022 has been dominated by a very unusual trend – that of a decline in the US Real Money Supply (the amount of physical cash in circulation in the US along with any money held in bank accounts). In general, this can constrain portfolio liquidity, the ability to buy and sell assets. In addition, during September government budget proposals unsettled UK bond valuations, and the share prices of companies with large pension fund liabilities declined – such as Legal & General, BT Group, and Just Group. Interestingly, despite the share price instability, companies like Legal & General have highlighted that they don’t think the market turmoil has impeded their dividend prospects. If this is correct, then as the share prices of these types of companies paying an income, known as equity income stocks, decline, they become ever more attractive as the yield increases for new buyers.
During 2022 we have often seen the biggest decline in share prices in those companies listed on the Alternative Investment Market (AIM). The share prices of the main energy companies have held up relatively well over September, however the share prices of some smaller energy companies peaked after performing well over the last couple of years. Savannah Energy is a good example. This kind of dichotomy has occurred previously, and in the past has been subsequently reversed with the share prices of AIM listed equity income stocks outperforming the mainstream companies such as those in the FTSE 100 Index.
The Diverse Income Trust portfolio is multi-cap in nature and thus we are able select what we believe are the best companies to invest in, out of all UK listed companies, irrespective of their size. Furthermore, with the support of institutional capital such as ours, quoted companies typically have a genuine advantage during unsettled economic periods. They can afford to fund investment opportunities at a time when many private companies are more capital constrained.
Nick Sudbury, Investment Writer for Fidelity International noted:
The benefit of this all-cap approach was demonstrated by the resilience of the dividend during the pandemic, with the annual distribution only falling by 2.9% in 2020 before resuming its upwards trajectory the year after. In the latest annual results to the end of May 2022 the total pay-out was 3.9p per share, giving the fund an attractive historic yield of almost 4.3%. Please note this yield is not guaranteed.
Despite the recent dip in performance, the trust has generated NAV total returns of 193% over the last ten years (Source: Diverse Income, data to 31 July 2022). The shares are currently available at a 6% discount to NAV, compared with an average of 2% over the last year.
