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 recently published its annual results, providing further detail on the financial year to 30 June 2021. As we discuss in the Dividend section, the results show that in the past financial year, revenues have improved significantly and Job seems optimistic on the prospects of continued recovery in the current financial year.

CTY’s reliable income is a key attraction for investors, which is reflected in its premium rating and steady issuance of shares over past years. Mindful of this, when we met up with Job recently it was clear that he has been focussing on the revenue generating capabilities of the portfolio.

As a result of changes to the portfolio, as well as the banks and oil stocks having restarted dividend payments, only 1% of the portfolio is now non-dividend paying. Job has gently shifted away from the FTSE 100, towards mid-caps, but with the mid-cap and overseas markets generally offering lower yields, he commented that it has been hard to build up the portfolio in these areas whilst balancing the need to generate income. As the revenue account improves and the trust is once again able to pay a covered dividend, Job intimated that he would like to add to these parts of the portfolio.

As we discuss in Gearing, net gearing is at the bottom of the historic range, at 6%, reflecting Job’s caution around certain areas of the market and his wish to have capital to tactically deploy in any periods of volatility.

Analyst's View

CTY is a ‘dividend hero’ and has the longest track record of consecutive dividend increases in the sector. This is one of the key attractions of the trust in our view. Job takes a cautious approach to the management of City of London, aiming to provide long-term growth in income and capital. As we discuss in Portfolio, a key focus in the past year for Job has been rebuilding the trust’s dividend cover, and as we discuss in Dividend, this appears to be paying off.

Whilst CTY has outperformed over the long term, from a total return perspective, CTY has modestly underperformed in total return terms over the shorter term. That said, no other trusts can touch its record of the number of years of progressive dividend growth. The dividend is still uncovered, but Job’s length of experience, portfolio diversification, remaining revenue reserves, and the apparent strength of the board’s intent mean that CTY looks likely to continue to extend this track record into the future.

As a package, CTY’s low-cost active management geared towards providing long-term growth in income and capital remains attractive. The present trend of dividend payment recovery in the UK market, the manager’s prudent and income focussed approach, and the board’s commitment to providing shareholders with income all indicate that CTY’s half century plus of dividend growth still has legs.

bull bear
Very low OCF of 0.38%
Cautious approach means NAV performance can underperform in some market conditions
Consistency and experience 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
55 year track record in progressive dividend increases
Structural gearing can exacerbate the downside
Continue to Portfolio
2022 Kepler Income & Growth Rated Fund

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

Fund History

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...
View all

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