Dunedin Income Growth (DIG)

The most significant development for Dunedin Income Growth (DIG) this year has been the board’s introduction of an enhanced Dividend policy. Dividends will now be funded from both income and realised capital, rather than being tied predominantly to the portfolio’s natural income generation. The board has committed to a minimum dividend of 6.0% of NAV (based on the NAV as at 31/07/2025) for the financial year ending 31/01/2026, equivalent to at least 19.1p per share, a 34.5% increase year-on-year, implying a yield of around 6.4% based on the current share price. Annual income and realised gains will provide the primary funding source, alongside revenue and capital reserves of £298m, underpinning the distribution for the long-term. Additionally, funding from both income and capital gives the managers greater flexibility to focus on total-return generation.

Despite this, the investment process remains unchanged. Managers Ben Ritchie and Rebecca Maclean continue to target high-quality companies with durable cash flows, strong balance sheets and supportive long-term growth characteristics. Combined with the trust’s sustainability framework (see ESG), which blends exclusions, positive allocation and active engagement, this keeps the portfolio anchored in fundamentals whilst maintaining responsible positioning.

Portfolio activity over the past year has reflected the opportunities emerging in a historically undervalued UK market. The managers have added to areas where valuations appear to underappreciate cash-flow durability and long-term compounding potential, particularly across smaller companies, with new positions including Kainos and XPS Pensions Group.

Performance over the 12 months to 15/12/2025 was mixed. A positive NAV total return of 9.7%, was supported by strong contributions from Prudential and Chesnara, though in relative terms, DIG lagged the FTSE All-Share Index’s 19.9% return, reflecting style headwinds and lack of exposure to stocks outside its quality and sustainability criteria.

At the time of writing, DIG trades at an 7.6% Discount, wider than the five-year average of 5.9%.