Dunedin Income Growth Investment Trust sees NAV rise by 8.1%

Dunedin Income Growth Investment Trust sees NAV rise by 8.1%

Dunedin Income Growth Investment Trust, a company managed by abrdn, has seen its Net Asset Value (NAV) rise by 8.1% in 2021.

For the year ended 31 January 2022, the company’s share price total return rose by 12.5%, this compares to the benchmark, FTSE All-Share Index, which produced a total return of 18.9%.

Three quarterly dividends of 3.0p per share, with a final dividend of 3.9p per share have also been proposed. This will make a total dividend of 12.9p per share for the year, an increase of 0.8% on last year.

Over three and five years, NAV total return has been ahead of the company’s benchmark: 31.7% (three years) and 41.8% (5 years) versus the benchmark returns of 21.7% and 30.2% respectively.

The firm’s board said dividends from the portfolio holdings rebounded more sharply than expected, driving a significant uplift in the revenue return per share.

The £440m company looks to achieve growth of income and capital from a portfolio invested mainly in companies listed or quoted in the United Kingdom that meet the company’s sustainable and responsible investing criteria as set by the board.

Ben Ritchie, Rebecca Maclean and Samantha Brownlee, investment managers, Dunedin Income Growth Investment Trust, said: “After several years of strong relative performance, for the year ended 31 January 2022, the company’s returns lagged the benchmark FTSE All-Share Index. The net asset value total return for the year of 8.1% compared to a total return of 18.9% from the benchmark.

“It was a year where our style and strategy faced a number of headwinds. Our strategy of building a concentrated portfolio and being willing to be different to both the benchmark and peers does mean that there can be periods where our returns may differ markedly from either.

“Most of the time, we would expect that difference to express itself in a positive way but, unfortunately, for the year under review, that was not the case. Importantly, though, we consider the portfolio to be in good shape with our focus on higher quality companies, an emphasis on investments that can deliver both income and capital growth, as well as the application of sustainable and responsible investing principles, positioning us to be able to cope with what may be difficult market conditions ahead.”

They added: “Total return performance notwithstanding, it was a year where there were a number of important strategic and financial developments. The implementation of the sustainable and responsible investment criteria was completed, positioning the Company uniquely amongst its peer group, while maintaining the cadence of dividend receipts.

“The portfolio continued to focus on delivering growth of both capital and income in a differentiated fashion with active share standing at 81% and more than half the portfolio invested outside the FTSE 100 Index. As a result, income generation came in ahead of our expectations hitting record levels and the discount to net asset value at which the Company’s shares have traded for many years moved to a modest premium.”

Commenting on the outlook, David Barron, chairman, Dunedin Income Growth Investment Trust, said: “Over the past six years, the Dunedin Income Growth Investment Trust has undergone a significant shift in its portfolio to focus more on total return and dividend growth and adjusted its mandate to formally incorporate a greater focus on sustainability.

“While this financial year, and particularly the second half of it, has been a difficult period for relative performance, the Board believes that this is the right strategy to deliver earnings and dividend growth over the longer term. The volatile economic and political environment that has been unleashed by the conflict in Ukraine should further support a focus on resilience.

“It is likely that continued outperformance from commodity-related sectors will prove to be a headwind to relative performance given the scale of those sectors within the UK equity market and the challenge of gaining exposure, given the Company’s focus on both higher quality companies and sustainability.”

He continued: “Against this very complex backdrop, the Investment Manager’s focus on investing in companies with pricing power, strong balance sheets and with greater exposure to structural rather than cyclical growth should offer greater resilience in both capital and income generation. The Company’s track record over the past five years adopting this strategy is very creditable.

“We cannot predict when a semblance of normality will return to markets and economies, but the Board is confident that the Company is well-positioned to deliver relative total return outperformance over the medium and long term which, combined with the portfolio’s income growth potential, should enable Dunedin Income Growth Investment Trust’s shares to continue to trade close to NAV.”

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