- Another year of above-average returns
- 58th consecutive year of dividend growth
- Lower annual fees
The popular City of London (CTY) investment trust delivered another year of outperformance and dividend growth, marking 58 consecutive years of increases, the longest record in the AIC’s (Association of Investment Companies) list of Dividend Heroes.
The shares traded down 1.65p or 0.37% to 439.9p, but are within touching distance of the all-time high of 450p reached just before the pandemic in November 2019.
For the year to 30 June, the trust produced a net asset value total return of 15.6% outperforming the FTSE All-Share total return of 13%. The trust’s total return has bested the index over the last three, five and 10 years.
The trust is also ahead of the AIC UK Equity Income sector average over one, three, and five years, but lags over 10years.
INFLATION-BEATING DIVIDENDS
The trust’s annual dividend increased by 2.5% to 20.6p per share, ahead of UK CPI (consumer price index) inflation, and was fully covered by earnings per share which rose 3.6% to 20.9p. Revenue reserves increased by 5.8% to 9.43p per share.
Over the last decade, the trust’s dividend has grown by 39.6% which is ahead of cumulative UK CPI (consumer price index) growth of 33.8%. The board said it ‘fully understands the importance of growing the dividend in real terms through the economic cycle’.
At the period-end, the trust had a dividend yield of 4.9% which was higher than the FTSE-All Share and AIC UK Equity Income sector yields of 3.7% and 4.2% respectively.
The board has agreed with the company’s manager, Janus Henderson, to reduce the investment fee rate from 0.325% to 0.3% from 1 January 2024, which is expected to reduce the ongoing charge in the current financial year.
MOVERS AND SHAKERS
Performance was driven by stock selection with positive contributions coming from investor in private companies, 3i Group (III), defence company BAE Systems (BA.) and high-street lender NatWest (NWG).
On the negative side of the ledger, not owning aircraft engine manufacturer Rolls-Royce (RR.) hurt relative returns while the second- and third-biggest detractors were holdings in St. James’s Place (STJ) and Shell (SHEL).
New holdings include BT (BT.A), where manager Job Curtis is attracted by the telecom operator’s expected ‘strong’ free cash flow growth, Hilton Food Group (HFG) and British fashion company Burberry (BRBY).
Acknowledging the trench coat maker has made mistakes in its strategy of moving to higher-priced products and lower demand from China, Curtis believes Burberry has ‘significant recovery potential as its markets improve and the new management team develops a better strategy’.
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