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City of London Trust - UK stocks under pressure but dividends survive

UK stocks may be out of favour with international investors but City of London Trust manager Job Curtis tells Emma Wall there are still income opportunities out there.

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.

  • UK stocks are out of favour thanks to political headwinds
  • Dividends are holding up despite share prices having fallen
  • Income investors should be aware that risks remain

The views in this video are those of Job Curtis and may not be shared by Hargreaves Lansdown.

Read transcript

Emma: Hello I'm Emma Wall and joining me today is Job Curtis manager of the City of London Trust. Hello Job.

Job: Hello

Emma: So for various reasons sentiment towards UK stocks has been depressed recently but despite share prices being lower than historically dividends seem to be doing okay is that fair?

Job: Yes I mean dividend growth has been low single-digit percentage growth which is not bad. There have been some high-profile dividend cuts but across the market overall dividend growth is reasonable and combined with a 4% yield from the UK equity market that's pretty attractive relative to the main alternatives.

Emma: And for you then as an income investor this must present opportunities because you've got that interesting entry point at share price level but still presumably quite exciting prospects for dividends?

Job: Well yes the market has obviously done well over the years but as you've said earlier the market has underperformed some overseas markets particularly last three years and so there are definitely opportunities and some of the domestic stocks within the stock market are particularly depressed about political Brexit type concerns so the core of City of London's portfolios is in global UK listed stocks but we do have some interesting domestic stocks as well where there's a lot of potential.

Emma: Now Brexit seems to be changing on a daily basis so it must make it very difficult to make any investment decisions based on the politics how do you ignore that noise and sort of zero in on the opportunities?

Job: I think the key thing is to stick to the companies and the valuations and the dividends I mean there's an old phrase about being paid while you wait and if you're sitting on a stock with a 4% yield growing at a decent pace then that's the sort of you could put up with a lot of the volatility of brexit or all the other geopolitical factors like rising tariffs globally.

Emma: And where are you seeing the greatest opportunities at the moment?

Job: Well I think there is a lot of potential in some of the domestic stocks I mean there's some very attractive yields out there. I mean, Lloyds Bank which has rebuilt its capital ratios substantially since the financial crisis and is now yielding 6%. And the house builders I think look very interesting - the biggest holding, Lloyd's is the biggest holding in City of London - our biggest house building holding is Taylor Wimpey which is in fact I expect to have a dividend yield of around 10% at today's share price and I think there's a lot of demand across the UK for housing -interest rates are low, unemployment's low so it's quite a good backdrop for the house builders at the moment.

Emma: You did however say in your earlier answer that there has been volatility and I think it's safe to say that investors should expect this to continue?

Job: Yes I think there's a lot of geopolitical issues you know out there and as well as our own politics so there I think there are a lot of factors there I mean we have at City of London at the core of our portfolio large global companies like Diageo or Unilever or Royal Dutch Shell, HSBC. So these are you know great core companies which I believe will be consistent in the long run but as I say the dividend outlook is reasonable and I think that is something that should give investors comfort

Emma: Job, thank you very much


This video is not personal advice or a recommendation to invest. If you are unsure about the suitability of an investment please seek advice. All investments and the income they produce can fall as well as rise in value and you could get back less than you invest. Yields are variable and not a reliable indicator of future performance. Past performance is not a guide to the future. Please read the key investor information before investing for more details of the risks and charges.

The views in this video are those of Job Curtis and may not be shared by Hargreaves Lansdown.

Views correct as at 22.10.2019.

This video and 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 Investment Trust Factsheet

City of London Investment Trust Key investor information

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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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