City of London Investment Trust: 59 years of increasing dividends

Of all the investment trusts available on Fidelity Personal Investing, one of the most popular is the City of London, which made its regular appearance in the best-sellers list last month. It has recently released its annual accounts to the end of June, with details of another increase in the dividend.

There can be little doubt that it is the income that is responsible for the trust’s lasting appeal, with the distributions now having increased for an incredible 59 years in a row. The shares currently yield an attractive 4.2%, which is well ahead of the 3.5% offered by the FTSE All-Share and in line with the 4.1% average of its peer group.¹ Please note this yield is not guaranteed.

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Objective and approach

City of London aims to provide long-term growth in income and capital, mainly by investing in UK equities. The Board fully recognises and acknowledges the importance of the distributions to shareholders.²

Writing in the recent accounts, longstanding manager Job Curtis said that the portfolio is designed to continue growing City of London’s dividend and provide a competitive total return including capital appreciation.³

“It has a tilt towards stocks with above-average dividend yield, but some lower-yielding stocks are included within the mix for their growth potential. We believe the companies in the portfolio offer good value relative to our view of the prospects for earnings and dividend growth and compared with equivalents overseas.”⁴

The underlying portfolio

There were 77 holdings at the end of August, with the ten largest positions accounting for 38.7% of the assets. These included the likes of: HSBC, Shell, British American Tobacco and BAE Systems.⁵

City of London Investment Trust - top 10 holdings

1. HSBC
2. Shell
3. British American Tobacco
4. BAE Systems
5. Unilever
6. NatWest
7. Imperial Brands
8. RELX
9. Tesco
10. AstraZeneca

Source: City of London Investment Trust factsheet, 31 August 2025

The two largest sector weightings were Financials and Consumer Staples, with allocations of 33.4% and 21.3% respectively.⁶ Banking stocks were an important part of this, as the growth in their dividends played a key role in enabling the trust to increase its distributions.⁷

Although 92.3% of the portfolio was invested in UK listed stocks, 60% of the underlying earnings came from overseas, which limits the sensitivity to the domestic economy.⁸ The Chairman believes that this approach offers ‘global growth at a discount’ given the attractive valuations compared with similar international peers.⁹

Dividends

In the recent accounts, City of London announced an increase in the annual dividend of 3.4% to 21.3p per share, which was fully covered by earnings.¹⁰ This was the fifty-ninth consecutive yearly improvement and puts the trust in top spot in the Association of Investment Companies list of dividend heroes.

The key to this impressive record is that Curtis tries to avoid companies that cannot sustain their dividends, with the diversified nature of the portfolio limiting the impact of any unforeseen cuts. There is also the safety net of the revenue reserves that can be built up out of surplus income in good years and paid out in leaner periods.¹¹

City of London currently offers an attractive prospective yield of 4.2% with quarterly distributions. In its last financial year, it was able to top up the revenue reserves to 9.9p per share, which together with the long-term track record should give investors some comfort as to the sustainability of the income.¹²

Performance, discount and costs

According to the latest accounts, in the year to the end of June 2025 the trust achieved a share price return of 21.8%, which was well ahead of the 11.2% increase in the FTSE All-Share and the 12.6% achieved by the AIC UK Equity Income peer group.¹³ Its longer-term record is more in line with the benchmark, as over the 10 years to 31 August the gain of 106.8% was similar to the 108.5% produced by the index.¹⁴

The Board’s policy is that the share price should closely reflect the underlying net asset value (NAV) and in order to achieve this it will actively intervene in the market to buy back or issue new shares whenever appropriate.¹⁵ Unlike many other trusts, they have been remarkably successful in meeting their objective, as over the last three years the average premium was just 0.31%.¹⁶

Another impressive feature is the low ongoing charges figure of 0.36%, which is good value for such a reliable, actively managed fund. This is marginally less than the year before because of the reduction in the management fee rate.¹⁷

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Before investing, please read the relevant key information document which contains important information about each investment trust. The shares in City of London Investment Trust are listed on the London Stock Exchange and their price is affected by supply and demand. Investment trusts can gain additional exposure to the market, known as gearing, potentially increasing volatility. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of financial adviser or an authorised financial adviser of your choice.