City of London Investment Trust: Dividend Record is Music to the Ears of Investors
By Rachel Rickard Straus
Last updated: 17:20 BST, 9 October 2023
The UK economy has experienced its fair share of uncertainty over the past seventy years, marked by recessions, global financial crises, pandemics, and Brexit. However, one investment trust has proven to be a reliable source of increased dividends for its shareholders year after year – the City of London Investment Trust.
Throughout its history, the trust has focused on investing in UK-listed companies that generate substantial income for their shareholders. These dividends are then passed on to the trust’s own investors. Remarkably, City of London has achieved 57 consecutive dividend increases, making it the investment trust with the longest track record of consistent dividend growth.
Leading the trust for 32 of those years is Manager Job Curtis, who optimistically states, “We cannot promise future dividend increases, but we have every intention to continue our track record.” The success of the trust lies in its fund structure, which allows it to set aside up to 15% of its income each year. This reserve ensures the trust can sustain its dividend payments even during challenging economic periods.
The majority of City of London’s holdings consist of UK companies, accounting for approximately 83% of its portfolio. Many well-established FTSE 100 companies, such as Diageo, Unilever, and Shell, are prominently featured. While one might assume that the trust’s performance closely aligns with the UK economy, Curtis explains that 69% of the revenues generated by the invested companies come from outside the UK.
This diversification protects City of London from relying too heavily on the UK economy’s fluctuations. Furthermore, it has become increasingly advantageous as UK companies face sustained high inflation. Curtis notes, “The companies we invest in have a global outlook and experience operating in countries that historically grapple with high inflation, such as India and Brazil.”
City of London’s investment approach emphasizes long-term holdings, often lasting more than a decade. However, the team is not hesitant to make changes, even if they go against prevailing trends. Curtis mentions, “In June, we sold our stake in Microsoft, which we had held since 2011. While it is currently in the spotlight due to the growth of AI, the stock has yielded significant returns since our initial investment. We decided to take the profit and move on.”
Under the leadership of Curtis and his team of fifteen, they are constantly searching for new investment opportunities. Sometimes, these opportunities present themselves unexpectedly. Curtis shares a recent example, “In June, we purchased Round Hill Royalties, a company that acquires rights to songs, at a 40% discount to its asset value. As a music enthusiast, I recognized the potential growth in older fans like myself who are still discovering and streaming music.”
The trust’s holding in Round Hill has already experienced a 65% increase in value due to a takeover approach. City of London’s ongoing annual charge is 0.37% and can be found under the stock market ID code CTY.
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