City of London

CTY’s large cap bias means it has lagged the index recently, but the dividend picture is still strong…

Add to watchlist Request a meeting Download View key data

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by City of London. 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.

City of London
2021 Kepler Income & Growth Rated Fund

This trust has been awarded a rating by Kepler for income & growth... Find out more

City of London’s (CTY) objective is to provide long-term growth in income and capital. The trust has the longest track record of providing annual dividend increases in the investment trust sector. The board has stated that it intends to continue to pay a progressive dividend, which if achieved in the current financial year will represent 55 consecutive years of growth.

Job Curtis, CTY’s manager for 30 years, is a fundamental stock picker who prefers defensive companies which can deliver demonstrably sustainable cash flow to support both dividends and capital expenditure. As we discuss in Portfolio, Job has not been tempted into more cyclical areas of the market. This has resulted in a short-term relative performance headwind this financial year, but Job has a track record of adding value through stock selection in eight of the previous ten financial years.

Job continues to believe that the path back to economic normality will not necessarily be a smooth one. The UK’s dividends may have taken a significant knock, but he is positioning the portfolio for a long-haul recovery in the trust’s income. As we discuss in Dividend, the board have stated that they have adequate reserves to support the dividend for the foreseeable future, but Job is also exposed to companies like BHP which have demonstrated they are capable of significant improvements to their dividends.

City of London offers a historic dividend yield of 5.3%, representing a chunky yield premium to the UK equity market. The trust is large, liquid, and low cost (see Charges), and continues to attract demand from investors for the shares which currently trade at a premium of 3%.

Kepler View

In our view, investors are attracted to City of London’s high yield, the unrivalled record of dividend progression, and the low cost of the trust. This, together with the historic stability of the discount/premium, makes an attractive package in our view.

Job is a fundamental stock picker who can look back on 30 years of experience to help him navigate markets. At a time like this, we believe this is a huge asset to the trust. His cautious nature and valuation aware investment approach has seen him avoid the cyclical rally we have seen recently. However, in our view, of more interest to investors than short term out or underperformance, is the prospect of the trust’s income recovering such that it becomes covered once again.

Job has stuck to his guns and retains his preference for conservatively run and well-financed businesses. This approach has stood him well over the long term, as is shown in his track record of delivering small but steady outperformance over the years, and an enviable dividend track record. Since September, City of London’s shares have once again been in demand, and currently trade on a premium to NAV of 3%. This is slightly ahead of the five-year average premium to NAV of 1.6%. The sector beating OCF of 0.36% is another reason City of London may continue to attract strong demand from investors.

BULL
BEAR
Very low OCF of 0.36%
Balanced, large-cap portfolio means NAV performance can underperform in some market conditions (such as the current cyclical rally)
Consistency of manager who has delivered long term outperformance of the FTSE All Share in capital and income terms
Income track record highly attractive, so manager might risk long-term capital growth in trying to maintain it
Fifty-four-year track record in progressive dividend increases
Structural gearing can exacerbate the downside
William Heathcoat Amory
William Heathcoat Amory is a co-founding partner of Kepler Partners LLP and leads the Kepler investment trust research team. William has 18 years of experience as an investment company analyst. Prior to co-founding Kepler Partners in 2008, he was part of the Extel number 1 rated research team at JPMorgan Cazenove.

Fund History

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. A copy of the firm’s Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 9/10 Savile Row, London W1S 3PF with registered number OC334771.



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.