Fund Profile

Disclaimer

This is a non-independent marketing communication commissioned by abrdn. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
DIG is the only UK Equity Income trust with an explicit sustainable investing mandate…
Overview

Dunedin Income Growth Investment Trust (DIG) is a trust within the UK Equity Income sector that has undergone significant evolution over recent years. The objective to grow income and capital from a portfolio of mainly UK listed companies was supplemented in June 2021 with the requirement for trust holdings to meet the board’s sustainable and responsible investing criteria, making DIG the only trust amongst its peers with an explicit ESG mandate (the criteria are laid out in detail in the ESG section).

The inclusion of sustainability criteria has doubled down the focus on quality-growth that has been in place since 2016, with the lead manager Ben Ritchie pivoting DIG away from a more conventional UK equity income strategy (depending on high yielding but lower growth companies such as high street banks and oil majors) towards buying companies with better long term prospects. As discussed in Portfolio, this has resulted in a meaningful tilt towards mid and small cap companies versus the trust’s benchmark. The focus on quality also dovetails with a high conviction approach to portfolio construction, DIG being one of the most concentrated trusts in the sector.

Despite the greater focus on dividend growth rather than maximising yield, DIG currently yields c. 4.3%, a substantial premium over the FTSE All-Share Index yield of 3.2%. As noted in the Dividend section, DIG’s pay-out has now grown in 38 of the last 42 financial years (and been maintained in the other four years).

The recent inflationary rally in commodity prices has been a short term headwind to relative performance for DIG, however, the Discount remains near par. The combination of the focus on quality growth, good yield, the explicit commitment to responsible investing, and low cost (DIG’s OCF is 0.59%) appears to have a strong appeal.

Kepler View

Some might consider the UK Equity Income sector to be somewhat staid. In our opinion, DIG is a trust that might change this view, bringing an innovative and fresh approach to the sector. This is most obvious with the pioneering adoption of ESG investing. However, the high conviction, highly concentrated investment portfolio is also breaking the mould: as at 28/02/2022, DIG held 38 stocks compared to the sector average of 67 holdings. The high active share, quality-growth and mid and small-cap tilted portfolio all point to DIG trying to deliver significantly more to its investors than just a dependable yield (which it certainly has).

DIG’s highly concentrated strategy raises the relative risk, but this is moderated by a cautious approach to Gearing, a preference for stocks with defensive characteristics and portfolio construction that dampens down unnecessary stylistic risks. Although DIG’s relative performance will likely suffer in the short run if low-scoring ESG stocks rally (as has happened recently with the inflationary rally in commodity prices and the subsequent outperformance of miners), for investors with a longer-term time horizon and the belief that higher-quality companies will re-establish their market leadership, the combination of an attractive current yield, capital growth potential, long track record of dividend growth, ESG awareness and cost-effectiveness could make DIG appealing.

Bull

  • Offers an attractive dividend yield pick-up versus the wider UK market
  • Only UK Equity Income trust with explicit ESG mandate
  • Cost effective with a low OCF of 0.59%

Bear

  • ESG exclusions will result in underperformance if poorly rated ESG stocks and sectors rally
  • Some recent turn-over in the management team
  • Trading near par so little opportunity for discount narrowing
Continue to Portfolio

Fund History

27 Apr 2022 Fund Analysis
DIG is the only UK Equity Income trust with an explicit sustainable investing mandate…
18 Aug 2021 Fund Analysis
DIG’s shareholders recently voted to incorporate ESG into the trust’s investment objectives…
11 Aug 2021 In at the deep end
Does seeking out wider-than-usual discounts help investors systematically outperform in the UK trust space?
03 Mar 2021 Strength in depth
UK Equity Income trusts have done a heroic job of maintaining their dividends through the pandemic...
03 Mar 2021 Fund Analysis
DIG offers a high yield backed by large revenue reserves…
29 Jul 2020 To be, or not to be (geared), that is the question
Gearing is part of the toolkit that trusts use to outperform OEICs. But how is it best implemented?...
20 Jul 2020 Fund Analysis
Seeking to grow income, and with substantial revenue reserves, DIG invests primarily in UK companies...
01 Jul 2020 Oh the humanity...
We consider two strategies to cope with markets which, boosted by massive government support, may be witnessing the start of a ‘melt-up’ which may be followed swiftly by a melt-down...
15 Apr 2020 Hold fast
Investment trusts' revenue reserves could make them a vital stronghold for investors facing UK dividend cuts of as much as 47%....
16 Jan 2020 Fund Analysis
Seeking to grow income, and with substantial revenue reserves, DIG invests primarily in UK companies...
17 Jul 2019 Ready for action
In the second part of our active management series, we assess the most active managers across the major closed-ended equity sectors…
07 May 2019 Fund Analysis
Run by Ben Ritchie and Louise Kernohan, Dunedin Income Growth is a turnaround story starting to bear fruit...
01 Oct 2018 Fund Analysis
A UK-focused equity trust, which aims to generate a growing income while achieving capital growth in excess of the FTSE All Share...
View all

Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.