Investors welcomed news that City of London Investment Trust (CTY) outperformed the UK market and income indices in the six months through December 2021, sending the shares 0.7% higher to 409.8p.
The 6.9% growth in net asset value nudges the trust ahead of both the FTSE All-Share and the UK Equity Income sector performance over one year, notching up a 20.1% total return compared with 18.3% and 19.2% respectively.
Many investors rely on the trust to provide income and so the unchanged 4.9% dividend yield of the trust, ahead of the 3.6% offered by the FTSE All-Share is also pleasing.
The trust ended the period trading at a 2.6% discount to net asset value of 404.4p compared with a premium of 0.6% on 30 June 2021. Gearing increased from 6.9% to 8.3%.
STOCK SELECTION
The extra gearing and good stock selection contributed positively to the performance in the half with Wm Morrison and Tesco (TSCO) highlighted as key performers, with the former being taken over by private equity following a bidding war.
Business information provider RELX (REL) and Microsoft were also singled out as key contributors while fund manager M&G (MNG) and French national lottery operator La Francaise des Jeux were the two biggest detractors to performance.
The company highlighted a significant recovery in dividends from the UK banks and oil companies while mining firms Anglo American (AAL) and Rio Tinto (RIO) declared increased dividends as well as special dividends.
The trust bought new positions in investment company 3i (III) and international building materials group Holcim, providing exposure to fast growing private companies and infrastructure spending, respectively.
Financials and consumer staples are the trust’s largest sector exposures, representing a combined 45% of assets.
DIVIDEND GROWTH
The trust has declared two interim dividends of 4.8p per share so far in the financial year and the board said it was confident it will be able to increase the dividend for an impressive 56th consecutive year.
