City of London: shares bought and sold in dividend drought
Job Curtis explains how he responded as scores of UK companies cut dividends.
26th August 2020 10:02
by Kyle Caldwell from interactive investor
Share on
Job Curtis, manager of the City of London investment trust, explains how he responded as scores of UK companies cut dividends.
It has been a tricky environment for income seekers in 2020, with various businesses cutting, suspending or cancelling dividends in response to the Covid-19 pandemic.
A total of 445 companies listed on the London Stock Exchange have either cancelled, cut or suspended dividend payments between 1 January and 24 July, according to research from ETF fund manager GraniteShares. Of these, 50 were FTSE 100 companies and 108 housed in the FTSE 250 index. The second quarter’s 57% dividend decline was by far the biggest ever recorded, according to Link Group’s Dividend Monitor.
The likelihood is that fund managers who have a mandate to provide income will have been making more changes than usual to their respective portfolios.
- Dogs of the Footsie review: no hiding place for our 10 stocks
- Income pledges of 11 investment trust ‘dividend heroes’ revealed
- Why professional investors are more bearish than bullish
Job Curtis, manager of the City of London investment trust, which recently raised its dividend for the 54th consecutive year, acknowledges that it has been “quite an active period.”
Among the changes made to the portfolio, Curtis significantly reduced exposure to travel and leisure, with Compass Group (LSE: CPG), Whitbread (LSE: WTB) and Cineworld (CINE) exiting the portfolio. Bank holdings have also been reduced, due to the sector being banned by the regulator from paying dividends in 2020.
Curtis says: “While [banks] are in a much stronger position than [during] the financial crisis, they are certainly leveraged institutions and vulnerable to economic downturns, so we sold out of Royal Bank of Scotland (NatWest as it is called now – LSE:NWG) and reduced Barclays (LSE:BARC), Lloyds (LSE: LLOY) and HSBC (LSE: HSBA).”
In terms of additions, Curtis has mainly reinvested in the consumer staples sector, as well as tactically boosting exposure to non-UK stocks.
He explains: “In some situations there have been overseas stocks that are better placed than UK ones. We sold BT (LSE: BT.A), which is not paying a dividend, and added to Deutsche Telekom (XETRA: DTE).
“In the oil sector, we reduced Royal Dutch Shell (LSE: RDSB) in favour of Total (EURONEXT: FP), the French international oil major, which has not cut its dividend.”
To find out Curtis’ views on the outlook for dividends for the rest of 2020 and why City of London looks well-placed to continue its impressive dividend growth track record, listen to the podcast.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.