City of London extends run of dividend increases to 55 years

The trust announced it would increase its dividend by 0.5% to 19.1p for the year. 

City of London (LSE:CTY) has once more increased its dividend, extending an incredible run of consecutive increases to a 55th year, according to its recently published annual financial results.  

The trust, included within interactive investor's Super 60 list of rated funds, said it would increase its dividend by 0.5% to 19.1p for the year. This was funded by the trust dipping into its revenue reserve. Investment trusts have the ability to hold dividend payments in reserve to be distributed at a later date, when underlying payments from companies have been reduced. 

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This mechanism has allowed many investment trusts to continue to grow their dividend per share despite the huge cuts in dividend payments in 2020 owing to the pandemic.

Last year, City of London drew £14.4 million from its reserves to pay and grow its dividends. Since then, dividend payments from companies have recovered. As a result, City of London has been able to fund its dividend payment for this year with less money than before, drawing down £8.1 million.

The trust noted that it expected payments from underlying companies to improve in coming months. It said: “Dividend declarations by some of our investee companies during the last quarter of the 12-month period and during the first two months of the next financial year have been particularly encouraging and, if sustained, will materially improve our full-year revenue return next year.” City of London’s revenue earnings per share rose by 8.6% to 17.09p.

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In terms of performance, the trust slightly underperformed its benchmark, the FTSE All-Share index. While the index returned 21.5% to June, the trust’s net asset value total return grew by 20%. In terms of share price, the trust returned 21.3%, a whisker below the index’s performance.

However, the trust’s performance lagged the average for both the AIC UK Equity Income and IA UK Equity Income OEIC sectors over the 12 months.