City of London Trust: Consistent Dividend Payor Experience High Returns, Increasing Investor Profits by 22% in One Year
The City of London Investment Trust (CLIG), a well-established UK equity income fund, has been delivering a consistent income to its shareholders while aiming for long-term capital growth. However, the trust has faced some operational and client retention challenges in recent times.
Over the past year, the trust's shares have seen a modest increase, briefly breaching the £5 mark for the first time in its 134-year history last week. Despite this, the shares currently stand just below that level.
CLIG's investment strategy focuses on income generation via dividends combined with capital appreciation. In the last financial year, the trust's income payments totalled 21.3p a share, a 3.4% increase from the previous year. The trust's dividend yield currently stands at around 9%, making it an attractive option for income-focused investors.
Despite pressures on earnings and currency headwinds, the trust has managed to sustain its dividend payments. However, the dividend cover ratio has been tight, with management projecting a need for operating margins beyond 45% to maintain a 1.2x dividend cover, suggesting limited room for error.
In terms of performance, CLIG has generally outperformed its benchmark, the FTSE All Share Total Return Index (FTSE AllSh TR GBP), particularly over recent years. For instance, in the year ending June 2025, the trust achieved a net asset value (NAV) total return of approximately 21.78% compared to its peer group index return of 17.24%, indicating outperformance. Over the past five years, its annualized return was about 13.96%, slightly exceeding the peer group index's 13.57%.
The trust's shares trade at a small premium to the underlying assets, unlike many rivals. This premium, combined with the trust's strong yield, has historically attracted investors.
However, persistent client outflows, cost pressures, leadership change, and tight dividend cover have kept the share price at relatively low levels despite the strong yield. Investors should monitor these factors closely as they could impact the trust's future performance.
One notable aspect of the City of London Investment Trust is its long-term consistency. The trust has paid increasing dividends for 59 consecutive years, a record unmatched by any other investment trust. This long-term track record, combined with its competitive yield and historically strong performance, makes CLIG an interesting choice for income-focused investors.
[1] Source: City of London Investment Trust Annual Report 2024-2025 [2] Source: City of London Investment Trust Half-Yearly Report 2024-2025 [3] Source: City of London Investment Trust Annual Report 2020-2021
[1] For those seeking to bolster their personal-finance portfolio, the City of London Investment Trust (CLIG) could be an appealing choice, given its focus on finance and business, delivering a competitive yield and historically strong performance. [2] As investors analyze their options in the world of investment, the long-standing record of CLIG, including its dividend increases for 59 consecutive years, is a testament to the trust's continuity and commitment to investing in the finance sector.
