53 years and counting. (CTY).

[monabri]

https://www.hl.co.uk/news/articles/city ... -53rd-year

"City of London has increased its dividend for the 53rd year running"

"The Trust has released full year results to the end of June 2019, revealing a 2.7% increase in net asset value (dividends reinvested), a 3% increase in share price and a dividend rise of 5.1% from 17.7p to 18.6p although income is variable and not guaranteed

Code: Select all

End     | Q1    | Q2    | Q3    | Q4    | Special | Total  | Growth
06/2020 | 4.75p | tbc   | tbc   | tbc   |       - | tbc    | tbc   
06/2019 | 4.55p | 4.55p | 4.75p | 4.75p |       - | 18.60p |  5.08%
06/2018 | 4.30p | 4.30p | 4.55p | 4.55p |       - | 17.70p |  5.99%
06/2017 | 4.05p | 4.05p | 4.30p | 4.30p |       - | 16.70p |  5.03%
06/2016 | 3.90p | 3.90p | 4.05p | 4.05p |       - | 15.90p |  3.92%


[Darka]

I'm happy to hold CTY within my IT portfolio, and intend to for many years to come - hopefully.

[johnhemming]

I tried to understand the accounts for this and I could not see how the dividend is sustainable in the long term.

[Alaric]

I tried to understand the accounts for this and I could not see how the dividend is sustainable in the long term.

Being an Investment Trust, it's going to depend on what it gets from the shares it owns.

On page 45 of the 2018 accounts, the column for Revenue Reserve reads

b/f 48,598
net return 64,679
dividends paid (60,142)
c/f 53,135

So it's making more than it's distributing and has nearly a year's worth of dividends retained.

[johnhemming]

As far as I can see the net return was in part based upon trading, not just on dividends received. If it were to be only dividends received that were paid out that would be reasonable. However, if they are paying out the profit on profitable trades, but not crystallising any losses then at some point the music stops.

It did come up on my screen when I was looking at what to invest in about a month ago.

[77ss]

As far as I can see the net return was in part based upon trading, not just on dividends received. If it were to be only dividends received that were paid out that would be reasonable. However, if they are paying out the profit on profitable trades, but not crystallising any losses then at some point the music stops....

I occasionally look at CTY, and every time I decide its not for me - although my attitude may change as I age.

The results are interesting. Not wholly sure that I understand them, but here goes:

Net return after taxation - 42,509K
Dividends paid - 66,899K

Unsustainable one thinks.

However, the demand for CTY stock is such that:

Issue of 24,425,000 new ordinary shares - 99,116K

Which more than covers the difference. That's just one year of course.

Is issuing new shares akin to a central bank printing money?

[mc2fool]

The results are interesting. Not wholly sure that I understand them, but here goes:

Net return after taxation - 42,509K
Dividends paid - 66,899K

Unsustainable one thinks.

Where do you get those figures from? I can't find them anywhere in their latest annual report (2018). http://documents.financialexpress.net/L ... 465026.pdf

What I see is a net revenue return after taxation of £64,679K (Income Statement, page 42 as numbered, and other places) and dividends paid of £60,142 (Statement of Changes in Equity, page 43 and other places). The two figures are next to each other in note 20 Revenue reserve on page 59.

As far as I can see the net return was in part based upon trading, not just on dividends received.

Note 3 on page 48 shows that of the gross revenue return £69,976k came from dividends, with the table giving the breakdown between UK and overseas dividends, ordinary and specials, and from UK REITs.

[Alaric]

Note 3 on page 48 shows that of the gross revenue return £69,976k came from dividends, with the table giving the breakdown between UK and overseas dividends, ordinary and specials, and from UK REITs.

Elsewhere in the accounts there's also a statement of the relatively small gains from stock lending.

Like any fund manager it's going to be buying and selling investments from time to time. These show up in the capital account under investment gains and losses. The structure of an Investment Trust is that although now permitted, these do not normally finance the dividend.

Although the accounts show tax, the special rules for ITs mean it reclaims, or doesn't pay it in the first place. The net tax paid is minimal.

[johnhemming]

Thanks for that. I obviously did not spend enough time looking at this.

[mc2fool]

The results are interesting. Not wholly sure that I understand them, but here goes:

Net return after taxation - 42,509K
Dividends paid - 66,899K

Unsustainable one thinks.

Where do you get those figures from? I can't find them anywhere in their latest annual report (2018). http://documents.financialexpress.net/L ... 465026.pdf

Ok, I found where you are getting them from, it's the 2019 annual report which, so far, has only been released as an RNS; at least it hasn't been published in PDF form on CTY's website or anywhere else I've found. https://uk.advfn.com/stock-market/londo ... i/80767370

The £42,509K is the total of the net revenue return of £72,023K and the net capital return of £(29,514K). Dividends are paid out of the revenue account, and so was well covered. The loss on the capital account doesn't eat any cash, so doesn't affect the dividend, its cover or its sustainability.

[JuanDB]

CTY was my first investment trust and one I plan to hold forever. In the 5 years I’ve held income has increased by over 60%, increasing over 10% y/y with dividends reinvested. It should have doubled in less than 3 years time. The double compounding effect of increasing dividends reinvested soon add up; 8th wonder and all that!

As a core holding in an income IT portfolio it had a lot of plus points where reliability and predictable growth of income are desirable.

I went to the AGM a couple of years ago as an excuse for a day out in town with my wife. The AGM was as dull as dishwater, which is exactly what I hoped for. Cocktails in the duck and waffle after, a little less so.

Cheers,

juan

[Julian]

Quite a few posts recently have been expressing either concern (such as this one) or disappoint with total return for instance a thread where 5-year charts were presented showing quite unfavourable comparisons with FTSE100 and other ITs.

I do hold quite a lot of CTY and will almost certainly continue to add to my holding. Although I no longer consider myself a pure high-yield/HYP investor I do like to remind myself sometimes why I was first attracted to HYP which was to a large part down to one of the rationales presented that it could be an alternative to an annuity whereby one could get a similar level of somewhat dependable income for a given level of capital (a much higher level vs an annuity if one is young enough for annuity rates to be derisory) and, while there are absolutely no guarantees in equity investing, at least a solid chance of having a decent chunk of capital remaining on death rather than it all having been forfeited in the case of an annuity purchase.

For me CTY works well as an annuity substitute and now seems more appealing in that role than HYP since, although neither are really substitutes due to a greater risk profile and no absolute guarantees on income generated, something like CTY hides individual fluctuations in dividends better than HYP, generates fewer corporate actions, and its 53 year history of rising dividends although absolutely not a guarantee for the future is still comforting to me.

For the role it serves in my portfolio I don't need CTY to shoot the lights out on capital growth and dividend increases keeping pace with inflation or even just getting close to that is fine (the annuity rates get even worse when one opts for flat-rate increases let alone inflation-linked options). As long as CTY carries on plodding along as it has done in the last few decades that is good enough for me. I have other investments that are more aggressively targeting growth that sit alongside CTY in my portfolio.

Once I get much older, to a different stage in my life where I potentially don't want to bother with any investment uncertainty and maybe am frail and need expensive care that I want to be sure that I can pay for I might well end up cashing in investments to buy an actual annuity but at that point the rates should, due to my age and likely infirmity at the time, be much higher and possibly even generate more income than the investments that I would be selling off but I hope that point is still at least 20 years away.

- Julian

[Dod101]

Alliance has increased its dividend for 52 consecutive years so not far behind. They are of course very different beasts. Alliance has now transformed itself into an all equity portfolio investing worldwide, arguably a better proposition than City of London with its concentration on UK income shares, but of course horses for courses.

On the subject of IT accounts, there was a time when the they showed a clear distinction between Revenue and Capital Gains/Losses. That was sensible because dividends could only be paid from Revenue. Now the two columns are usually lumped together although Revenue itself can usually be found somewhere in the Report. Capital gains and losses are now just considered as income or not and there is a smidgeon of logic to that in that dividends can now be paid not just from revenue but also from realised capital gains, either current gains or from the Capital Gains Reserve.

Holding a small HYPish portfolio of UK income shares, City of London has no appeal for me as it would simply enlarge what is now a rather unattractive section of the market, although were I dispose of my directly held income shares, I might think about it.

Dod