Manager Commentary

Please read in conjunction with the Performance section above.

31 December 2020Gervais Williams & Martin Turner

Over the year bond yields moved lower, along with the unprecedented boost from additional fiscal and monetary stimulus after the pandemic, the stock markets finished the year on an improving trend. The NAV of the Trust rose 6.08% in December, which compares with the FTSE All-Share Index that rose by 3.86%. With the announcement of a Brexit agreement during the month, the FTSE AIM All-Share Index rose by 10.20% with the FTSE SmallCap Index (excluding Investment Companies) up 6.69%.

If anything, bond markets appear to sense that rising US government expenditure could lead to some renewed inflationary pressures. If bond yields do start drifting up, companies generating plentiful cash could become some of the best performers. The Diverse Income Trust has many of these companies in the portfolio. Furthermore, whilst some of the technology companies have been in the limelight, it has been possible to bring in additional financial and mining stocks to the portfolio on unusually low valuations. Many of these stocks are continuing to generate sustained and growing dividends, these provide some access to growing distributions at a time when many others have cut their dividend.

At the end of November, the Trust’s final dividend for the year to May of 1.05p was paid, so the total dividend for the year was 3.70p, up from 3.65p last year. In December, the first interim dividend of 0.85p for the current year went ex-dividend and is expected to be paid in February. The board has stated that it ‘expects to at least maintain the dividend level for this financial year, making use of revenue reserves if necessary.’