Dunedin Income Growth looking good ahead of 150th birthday – Dunedin Income Growth’s NAV return for the year to 31 January 2019 matched that of the All-Share index (both falling by 3.8%). The share price total return for the year was -0.83% reflecting a modest narrowing of the discount to NAV from 8.14% at the start of the year to 6.96%. Good stock selection helped offset the impact of being geared into a falling market. The company is paying a total dividend of 12.45p per share for the year, an increase of 2.9% on last year and slightly ahead of the rate of inflation which was 1.8% as measured by the Consumer Price Index.
During the year a history of the company was published as it approaches the 150th anniversary of its establishment. The chairman describes this as an interesting and at times colourful story which highlights the long-term nature of investing and the durability of investment trusts as a vehicle for a wide range of investors, and in particular private investors. The book is available on the company’s website.
Extract from the manager’s report
“At the company level notable outperformers included Edenred, which benefitted from a recovery in its operations in Brazil as well as continued strong growth in its payments and expense management units. Aveva, which specialises in design software for large capital projects, saw improved demand from its customers in oil & gas and the first synergies being delivered from the merger with Schneider. Pleasingly, Telecom Plus, one of our newer holdings, performed well during the second half of the year as market conditions within the UK utility supply market continued to shift in its favour. Once again the portfolio benefited from its overseas holdings which made a further useful contribution to performance.
One of the main headwinds to performance came from the underweight position in the oil and gas sector which performed relatively robustly for much of the year. Our positioning here is driven by the lack of dividend growth from the companies and the relatively capital intensive and cyclical nature of the industry. Given high yields, we retain some exposure to both Total and Royal Dutch Shell but, given our strategy, this area is likely to remain a modest weighting relative to the large benchmark exposure. The holding in British American Tobacco was also hit following a series of potential regulatory changes within the key US tobacco market that dented investor confidence following the company’s acquisition of Reynolds American in 2017. We retain the holding, believing the impact of such changes to be overly discounted in the current share price. Relative to the benchmark, we also missed out by not owning BSKYB or Shire Pharmaceutical which were both taken over during the year and together provided a near 1% impact on relative returns.”
DIG : Dunedin Income Growth looking good ahead of 150th birthday