DIG has raised its dividend every year since 2011, beating inflation…by Josef Licsauer
Overview
Dunedin Income Growth Investment Trust (DIG) is managed by Ben Ritchie and Rebecca Maclean, whose process combines a search for high-quality UK companies with a sustainability framework, blending exclusions, positive allocation and engagement. Following an extensive board review, the trust’s negative screening criteria have been eased this year (see
The managers have already used this additional flexibility to initiate two new Portfolio positions: Rolls-Royce, where the managers see small modular reactors as a genuine clean energy opportunity, alongside defense activities they view as protective rather than offensive; and Rio Tinto, for its copper business, a low-cost, well-governed enabler of the energy transition. Elsewhere, the managers took advantage of recent market volatility, topping up several mid-cap names, whilst using AI-driven weakness to add to RELX, Experian and Softcat, which they view, in contrast to the market, as longer-term AI winners.
Over the past year to 04/08/2026, DIG delivered a positive NAV and share price total return of 13.3% and 13.7% respectively, aided by strong contributions from NatWest, M&G and ASML. The wider UK market performed considerably better, however, returning 22.0%. DIG’s quality bias, sustainability exclusions and above-index small- and mid-cap exposure all weighed on relative returns, a dynamic that has also affected five-year Performance.
Regarding the Dividend, the trust delivered its enhanced 6.0% commitment, based on NAV as at 31/07/2025, in full, with total distributions for FY 2026 of 19.10p per share, a 34.5% increase on last year, marking the 42nd dividend rise in the past 46 years. At today’s price, this equates to a historic yield of around 6.0% and the board has stated it intends to maintain a progressive dividend policy.
At the time of writing, DIG trades at a 7.8% Discount, wider than its five-year average of 6.5%.
Analysts View
We think DIG’s enhanced dividend policy is a genuine strength, particularly given today’s higher-rate, uncertain backdrop. Beyond the 6.0% headline yield, DIG has increased its dividend every year since 2011 and has compounded that growth ahead of inflation over the past two decades, delivering real income growth across multiple cycles. Importantly, the dividend policy detaches distribution from the investment strategy, freeing the managers to prioritise total return over a specific yield target. Chesnara illustrates this well: a high-yielding stock trimmed to fund quality compounders with better dividend growth potential. The sustainability changes strike us similarly positively. The original 2021 screens had arguably become too static, and revisiting them as markets evolved is, in our view, what active management should look like. Crucially, the quality-focussed approach itself is unchanged, but DIG’s sustainability overlay is a genuine differentiator within the sector.
Performance has been a challenge, with DIG lagging the FTSE All-Share over both one and five years. The underlying headwinds, a quality bias and an above-market smaller companies’ allocation, which are both currently out of favour, could persist. The additional flexibility given in the sustainability remit may help ease this, though it’s too early to draw firm conclusions. Smaller companies’ historically higher growth rates over the long term may reassert themselves, perhaps leading to a sentiment shift, and DIG’s above-market allocation could capture a meaningful share of any re-rating.
Overall, we think the trust continues to offer a differentiated exposure to the UK market, shaped by a genuine sustainability overlay. And when combined with a strong income profile, pairing well-above-market yield with dividend growth ahead of inflation, this leaves the trust potentially well placed to appeal to investors reconsidering where they hold their savings following recent cash ISA changes, a shift that could also act as a further catalyst for the discount to narrow.
Bull
- Highly differentiated approach to both the peer group and index, with a focus on quality and sustainable income
- Well-diversified list of UK businesses that also derive revenues overseas, alongside select overseas holdings for added diversification
- Use of option writing gives managers greater flexibility to invest across the market-cap spectrum
Bear
- ESG exclusions will result in underperformance if stocks and sectors associated with higher ESG risks rally
- Exposure to mid-cap companies may bring more sensitivity to the UK economy
- Balanced investment approach may lag a value style-driven market
See the full research on DIG here >
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.
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