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City of London – dividend increased for the 53rd year

City of London has increased its dividend for the 53rd year running, however it was not all smooth sailing.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

  • City of London has increased its dividend for the 53rd year in a row
  • Job Curtis bought 5 globally focused companies
  • Returns were ahead of benchmark but less than last year

City of London Investment Trust has been run by manager Job Curtis since 1991 – one hundred years after the fund was first launched.

The Trust has released full year results to the end of June 2019, revealing a 2.7% increase in net asset value (dividends reinvested), a 3% increase in share price and a dividend rise of 5.1% from 17.7p to 18.6p although income is variable and not guaranteed.

The trust outperformed the AIC UK Equity Income sector, which lost 0.8% in the year to June 30, and the FTSE All Share which returned 0.6%. The trust also significantly outperformed the average equivalent open-ended fund – the IA UK Equity Income sector lost 2.6% over the period. Remember though that past performance is not a guide to the future.

It was not all smooth sailing through the year however – in the second half of 2018 the trust fell in value, mirroring the FTSE All-Share, as macro-economic concerns rocked markets. Slowing global economic growth and increased concerns about a US-China trade war saw global stocks suffer their worst quarterly fall in seven years at the end of 2018. UK political uncertainty also weighed on the UK market, as the Brexit deadline was pushed back to October 31 from March 31.

Brexit concerns proved a fillip for the trust however as the FTSE 100, which City of London is predominantly invested in, outperformed the more domestically focused FTSE 250, and the FTSE Small Cap Index.

Please note this trust can invest in smaller companies and uses gearing (borrowing to invest) both of which add risk. Investors should make sure they’re comfortable with the risks and charging structure, details of which can be found in the latest annual report and accounts and key information document.

Annual percentage growth
Aug 14 -
Aug 15
Aug 15 -
Aug 16
Aug 16 -
Aug 17
Aug 17 -
Aug 18
Aug 18 -
Aug 19
City of London Investment Trust Plc 5.2% 10.0% 9.9% 2.4% 1.8%
FTSE All-Share -2.3% 11.7% 14.3% 4.7% 0.4%

Past performance is not a guide to the future. Source: Lipper IM to 31/08/2019

International stocks drive returns

The trust is mostly invested in UK companies, with a small allocation to the US and Europe. It was the international stocks in the portfolio which contributed the most positively to performance in the year to the end of June – with Swiss confectioner Nestle providing the biggest boost, followed by US pharmaceutical firm Merck and US telecoms stock Verizon. The fourth best contributor was UK bakery chain Greggs.

The fund manager Job Curtis bought five new stocks over the 12 months to the end of June, including packaging company Mondi, plumbing firm Ferguson and coach operator National Express. In keeping with the investment process, although these companies are listed in the UK, they have international revenues, with customers in the US and across Europe.

Curtis also sold three stocks. British Gas parent company Centrica and materials manufacturer Low and Bonar were sold due to dividend cuts.

Outlook remains uncertain

The backdrop of macro-economic uncertainty is set to continue, with Brexit still unresolved, a US Presidential campaign underway and the US-China trade war rumbling on. Philip Remnant, chairman of City of London trust noted in the full-year results that “the record low level of 10 year bond yields, with Japan and several European countries in negative territory, indicates the considerable uncertainty about economic growth prospects”. There is also the looming spectre of a UK general election to navigate. But the chairman notes the international nature of City of London trust should help to shield investors from domestic concerns.

More about this trust, including charges

Key Information Document

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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