City of London investment trust increases dividend for 54th consecutive year
The news that City of London will increase its payments from the year prior means the trust has now incr…
21st July 2020 14:22
by Tom Bailey from interactive investor
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The news that City of London will increase its payments from the year prior means the trust has now increased its payments every year since the 1960s.
City of London investment trust has confirmed it will increase its dividend for 2020, continuing its 54-year streak of increasing payments.
In a filing to the stock market, the investment trust said it would pay a fourth interim dividend of 4.75p per ordinary share for the financial year ending 30 June 2020, due to be paid on 28 August 2020. That brings the total dividend payments for the year to 19p per share, an increase of 2.2% from the year prior.
The news that City of London will increase its payments from the year prior means the trust has now increased its payments every year since the 1960s.
There had been concern that the trust would force to give up its decade-long run of dividend increases due to the number of firms in its portfolio cutting or suspending their payments. Since the start of the year, the trust’s share price has slid by over 24%.
Philip Remnant, chairman of the trust, recently reassured shareholders that this would not be the case.
The trust, he said, would make use of its reserves to increase payments. Remnant noted in a letter in April: “Over the last 10 years, we have set aside over £30 million into revenue reserves to underpin future dividends in circumstances such as we face now. Those reserves stood at £58.3 million at 30 June 2019, our last financial year end. If in July we need to draw on those reserves to maintain our unique record of annual dividend growth, then it is our intention to do so.”
The ability of investment trusts to hold back cash in reserve and distribute later is a key attraction for income investors.
The statement from the City of London also confirmed its intention to increase its yearly payments for the current financial year ending 30 June 2021 above 19p per share, bringing its rising dividend streak to 55 years. This is likely to be funded from a combination of income paid form stocks during the year and revenue reserves, the trust said.
The letter also noted that trust, as of 30 June 2020, has an estimated £270 million in capital reserves.
This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.
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