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Fund Profile

Disclaimer

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.

Overview
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Overview

City of London Investment Trust (CTY) has an enviable position in the UK Equity Income sector, having the longest track record of dividend increases, the largest market capitalisation and the lowest charges. The trust aims to deliver long-term growth in income and capital predominantly from UK-listed companies, although its mandate allows for a 20% allocation to overseas’ markets. Lead portfolio manager Job Curtis has managed CTY for over 30 years and David Smith was promoted to deputy portfolio manager last year.

Job takes a term-term view on investments, taking a fundamentals’-based approach to investment analysis. He tends to be biased towards quality and value stocks and this has served the portfolio well throughout his tenure. Job is a stock-picker, with a strong track record of stock selection making a positive contribution to the portfolio returns (see Performance). He ensures that no one company can have an overbearing impact on the portfolio, which he ensures is diversified across sectors. On the face of it, the portfolio does not look geographically-diversified, but two thirds of its revenues are generated abroad. CTY has beaten the benchmark FTSE All-Share Index over the last ten years and has delivered the strongest return over the past year amongst its peer group, with the portfolio’s quality and defensive slant coming through.

During the pandemic, as portfolio companies withheld dividend payouts, CTY’s ample revenue reserves ensured that it could continue with steady increases in its own dividend payout and over the last financial year it completed the 56th consecutive annual increase in dividend. This places it at the top of the list amongst the AIC’s Dividend Heroes list (see Dividend section). CTY offers an attractive dividend yield of 5.2% and, with it being one of the largest trusts in the sector, it is also the cheapest with an ongoing charges figure (OCF) of 0.37%.

Analyst's View

We believe that for investors looking for an equity income fund to form a core part of their investment portfolio, CTY is a compelling proposition. Job Curtis has an impressive number of years’ experience running CTY and has guided the portfolio through several previous crises and bouts of volatility. This experience gives him the confidence to do what he does best, that is build a portfolio of quality and value-biased companies that generate steady cash flows with capital growth potential, whilst not becoming overly concerned by short-term volatility.

With markets in turmoil, Job’s conservative approach is proving its worth. Over the past 12 months to 30/09/2022, CTY has made a small gain in total return NAV terms, while the benchmark and peer group have both fallen. Quality, large caps and defensives have performed better than the growthier segments of the market and, in the last financial year, CTY has seen a strong bounce back in revenues so that the dividend is once again well-covered. We think the market’s confidence in Job is reflected in CTY trading at a premium to NAV of around 1.7% (see Discount section).

Bull

  • Very low OCF of 0.37%
  • Consistency and experience of manager who has delivered long-termoutperformance of the FTSE All-Share Index in capital and income terms
  • 56-year track record in progressive dividend increases

Bear

  • Cautious approach means that NAV performance can underperform in some market conditions
  • Income track record highly attractive, so manager might risk long-term capital growth in trying to maintain it
  • Structural gearing can exacerbate the downside
Continue to Portfolio

Fund History

13 Dec 2023 In-come all ye faithful
Equity income could be a beneficiary of the higher interest environment, with trusts a good way to capture it…
11 Oct 2023 Fund Analysis
CTY is an attractive package, backed by 57 years of dividend increases…
04 Oct 2023 To gear, or not to gear...
We examine the impact that rising rates have had on fund managers' appetite for gearing as a means to spice up returns...
06 Apr 2023 Fallen Kingdom?
Since the UK was described as a ‘Jurassic Park’ stock market, it has outperformed. Is this a new age for the stock market..?
02 Mar 2023 Fund Analysis
CTY’s managers aim to keep as many eggs in the basket as possible…
11 Jan 2023 Solving the Rubik’s Cube
We reveal the winners of our investment trust ratings for 2023…
23 Nov 2022 Guns n’ roses
A sustainable future for the free world may depend on investments in weapons and oil as well as traditional ESG friendly assets…
26 Oct 2022 Money for nothing
Debt measured at fair value has had a positive impact on NAV returns for a number of investment trusts this year...
07 Oct 2022 Fund Analysis
Longest (dividend growth), largest (market cap), lowest (charges)...
27 Jul 2022 Has the comeback begun?
Our analysts debate whether the market has fully priced in the current inflation and looming recession…
15 Jun 2022 Staying active
We highlight several alternatives to passive investments for investors looking for core exposure in uncertain markets...
27 May 2022 Out with the new, in with the old
Unflashy old school businesses may still deserve a place in your portfolio…
20 May 2022 Is it time to ditch index funds?
Averaging out makes sense in a boom market but may be much riskier in the future…
22 Feb 2022 Fund Analysis
Strong relative performance, and improving revenues suggest CTY is bouncing back…
15 Dec 2021 Dividends in the time of corona
Investment trusts have proven their worth during the pandemic, delivering dividend growth despite the turmoil…
03 Nov 2021 Don't fear the reaper
With market direction hard to call, we consider the case for taking a long-term view in the investment trust sector…
23 Sep 2021 Fund Analysis
CTY’s manager is seeing a good recovery in portfolio income, in turn leading to improved dividend cover…
28 Apr 2021 The next value opportunity?
Two of our analysts debate whether Europe's improving vaccination programme will be the next opportunity for investors in their pursuit of returns...
24 Feb 2021 Fund Analysis
CTY’s large cap bias means it has lagged the index recently, but the dividend picture is still strong…
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
01 Oct 2020 Alternatives for Income Investors
Slides and audio from our event focused on alternative routes to a reliable income…
30 Sep 2020 Fund Analysis
CTY’s dependable track record of dividend growth continues, but it has slipped to a rare discount…
30 Sep 2020 Slides and Audio: City of London
View the presentation and listen to the audio from our 'Alternatives for Income Investors' event on 29 September...
20 Aug 2020 Alternatives for income investors
In a world where dividend are under unprecedented pressure, our income focused online event in September should provide serious food for thought…
25 Jun 2020 Selling the family silver
Is there something fishy about a trust paying dividends from capital?
23 Apr 2020 Sucker punch
Two of our analysts debate the merits of equity income and alternative income trusts at this point in time...
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%....
12 Mar 2020 The importance of buying earners*
Our analysis shows that the impact of dividend contributions on long term returns is anything but trivial...
05 Dec 2019 Holding something in reserve
A sterling bounce poses a threat to UK dividends - we look at how UK equity income investment trust managers stand prepared…
14 Oct 2019 Fund Analysis
Fifty-three consecutive years of dividend growth, and counting…
14 Aug 2019 Dangerous ground: the perils of market timing
Our research shows that attempting to time the market is, more often than not, a mug's game...
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…
03 Apr 2019 Nice guys finish first
We review the rise of ESG, its impact on investment trusts, and the various ways ESG has evolved in the trust world...
06 Feb 2019 Income for the long haul
With 'ISA season' looming we identify investment trusts which offer long-term, dependable income streams for yield-hungry investors...
05 Feb 2019 Fund Analysis
The trust with 52 years of dividend growth, and counting...
09 Mar 2018 Fund Analysis
An income focused trust which aims to generate long term capital growth and a rising income, with an unbroken track record of dividend increases lasting half a century...
20 Nov 2017 Thin ice...
Our analysis shows the extent to which funds in the UK equity income sector are concentrated on just a few dividend paying stocks…
13 Sep 2017 Big Issue(rs)
We highlight the UK equity trusts that have issued and bought back the most shares over the course of 2017 so far and how these actions have affected shareholders...
08 Aug 2017 Fund Analysis
An income focused trust which aims to generate long term capital growth and a rising income, with an unbroken track record of dividend increases lasting half a century...
12 Jun 2017 MAYDAY!
As the Conservative party founders, we examine the impact of last week’s disastrous election on trusts...
11 May 2017 Storm proofing...
Our research shows dividend cover among UK equity income trusts is at its highest level in decade...
22 Mar 2017 The new kids on the block…
We highlight the three newest managers to grace the UK equity sectors and how they have put their own individual stamps on the portfolios they've inherited...
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