The City of London Investment Trust (LSE: CTY) has really lived up to the nickname “dividend hero”, says Ali Hussain in The Sunday Times. This year the trust, which was founded in 1891, will pay out 15.9p per share for the 12 months to June. This means it will have raised its dividend every year since 1966.
The trust has managed to increase dividend payments over such a long period partly because investment trusts don’t have to pay out all their earnings each year. Last year the trust only paid out 90.9% of its income, allowing it to put some aside into a “revenue reserve”. The trust has also recently profited from several special dividends – one-off amounts paid out when a company has experienced a windfall.
While several high-profile UK companies have recently cut dividends, fund manager Job Curtis believes the “hunt for income” – which in recent years has seen investors flock to shares that offer attractive dividends – is not as ill-fated as many commentators think. Some 90% of FTSE 100 constituents still pay attractive dividends, he told Lauren Mason of fund research site Trustnet.
However, it’s unwise to focus exclusively on high-yielding shares, he tells Hussain. A high dividend can mean the share price has recently fallen, which may reflect fears about the firm’s prospects.
The trust mainly invests in large British businesses. Almost 89% of its assets are invested in UK equities, though the trust has small holdings of European, US and Hong Kong equities. Curtis recently purchased real estate investment trust Hammerson, the owner of Brent Cross shopping centre in north London, which he thinks has become cheap as a result of needless fears over Brexit affecting the property sector. “Whatever happens after the referendum, people are still going to go to Brent Cross.”
The trust has an annual ongoing charge of 0.42%. The shares are currently trading at a 1.42% premium to their net asset value.
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| City of London IT top ten holdings | |
|---|---|
| Holding | % of assets |
| British American Tobacco | 4.8% |
| Royal Dutch Shell | 4.4% |
| HSBC | 3.2% |
| Vodafone | 3.1% |
| Diageo | 2.5% |
| BP | 2.4% |
| National Grid | 2.3% |
| Unilever | 2.2% |
| Imperial Tobacco | 2.1% |
| Prudential | 2.0% |