City of London Investment Trust reports that, in a flat year for equity returns its net asset value total return was 3.1%, ahead of each of the average for the AIC UK Equity Income sector, the UK Equity Income OEIC sector and the FTSE All-Share Index (by 0.8%, 4.8% and 0.9% respectively). The FTSE 100 Index of large companies outperformed. It produced a positive total return of 3.8%, while the FTSE 250 Index of medium-sized companies and the FTSE Small Cap Index produced negative returns of 4.6% and 1.5% respectively. City of London passed a major milestone in becoming the first investment trust to increase its dividend for the 50th consecutive year. The increase in the dividend was 3.9%, well ahead of the rate of inflation. Revenue earnings per share rose by 3.5% to 17.42p. Their ongoing charges ratio is 0.42%, the lowest in their sector.
Relative to the FTSE All-Share Index, City of London benefited from being under-represented in the banks sector which suffered from changing expectations that interest rates would stay lower for longer. Of the stocks held in the portfolio, the biggest contributions to outperformance were from: Verizon Communications, the leading US telecommunications company; Amlin, the non-life insurer, which was taken over; and British American Tobacco. This last share, which they have held for many years and is our largest investment, was acquired for an average price of GBP4.70 and now stands at over GBP47.00. Overall, stock selection contributed 1.54% to performance. Gearing, which started the year at 6.0% and peaked at 11.5% at the end of January before falling to end the period at 8.0%, detracted 0.32% from performance due to the equity market moving sideways.
17.5 million shares were issued at a premium to net asset value, for proceeds of GBP66.4 million, enhancing net asset value by 0.11%. In the past six years, City of London has issued 116.5 million new shares, which has increased its share capital by 56%. Since 30 June 2016, they have issued a further 3,175,000 shares.
CTY : City of London achieves 50 years of dividend growth