Diverse Income Trust plc (LON:DIVI) has announced its Factsheet for the month ended 31 January 2024.
Manager commentary
One of the key advantages of the Diverse Income Trust’s widely diversified mix of holdings is that in our view, its stream of dividend income has greater growth potential than that of the companies in the main stock market indices alone. Some portfolio holdings are mature but alongside there are others that are less mature. Many have sales and earnings principally overseas, along with others that are skewed domestically. Some are large companies (large-caps) and others are small companies (smallcaps).
Global stock markets have risen over recent months, as investors are cheered that the global economy
appears to have dodged a recession. Whilst this is reassuring, we worry that the ongoing reshoring of supply lines will add to inflationary pressures. In addition, the fragmentation of global trading relationships makes it harder for businesses to plan and hence invest for the future.
These trends may compromise global growth potential in future. There were similar headwinds between 1965 and 1985, when inflationary pressures and recessions were persistent. During these years, companies generating cash surpluses, such as companies paying an income that were listed in the UK, greatly outperformed most international comparatives. Furthermore, UK-quoted small-caps outperformed the UK large companies, and hence at the time they were one of the best performing parts of one of the best performing stock markets.
Whilst a multi-cap portfolio, like that of the Diverse Income Trust, has long-term advantages, its share
price fluctuations are often less closely correlated with those of the companies in the main stock market indices than others. This has led to Trust’s return falling behind others over the last two or three years, although importantly the adverse pattern hasn’t been reflected in the Trust’s dividend revenue. If the dividend revenue within the Diverse Income Trust continues to grow as at present, then the holdings, in time, should justify higher valuations.
Gervais Williams & Martin Turner
31.01.2024
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.
