Page 6 - DIY Investor Magazine - Issue 23

DIVERSIFYING FOR GOOD AND GROWING INCOME OPPORTUNITIES
In its latest Dividend Monitor, looking at income paid by companies to shareholders, Link Asset Services reported an important feature that is often overlooked, dividend growth.
In this case, its report highlighted that underlying dividend growth of UK listed companies was weaker than expected.
So, why is this important? Research shows that dividend growth companies tend to outperform the market in the long term.
However, as Michael Kempe, chief operating officer at Link Market Services said: ‘the UK’s dividend clothes are starting to look a bit threadbare underneath.’
One way to combat this trend is to look at a wider set of income opportunities. The Diverse Income Trust plc is able to do just this as it invests across a range of larger
‘THE UK’S DIVIDEND CLOTHES ARE STARTING TO LOOK A BIT THREADBARE UNDERNEATH.’
and smaller listed companies looking to generate a good and growing stream of dividend income.
One of the great advantages of this approach is the broader investment universe it can access.
Many investments that have an objective of delivering dividend income invest in the largest listed companies
‘A MUCH WIDER INVESTMENT UNIVERSE AND ITS PORTFOLIO INCOME IS THEREFORE DERIVED FROM A BROADER RANGE OF SECTORS’
as these are the largest sources of dividend income.
However, the largest listed companies tend to operate in a limited range of industry sectors, which means that their dividend income is closely linked to the prosperity or otherwise of the relevant industries.
The Diverse Income Trust invests across a much wider investment universe and its portfolio income is therefore derived from a broader range of sectors.
Importantly, this wider opportunity set also enables the fund managers to avoid participating in some industry sectors where their dividend prospects are anticipated to be less certain.
The company has demonstrated that it is able to deliver good and growing income. Since the Trust launched in 2011 it has increased its dividend year-on-year by 8.8%.
THE DIVERSE INCOME TRUST PLC
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DIY Investor Magazine | Oct 2019 6