CQS New City High Yield Fund (NCYF) delivered a NAV total return of 10.2% for the year to 30 June 2026, while its share price returned 10.1%.

NAV per share edged up to 48.55p from 48.37p, while the shares ended the period at 51.80p, leaving the trust trading at a 6.7% premium. That premium allowed NCYF to issue £36.8m of new equity during the year, with the proceeds deployed across its diversified portfolio of high-yield bonds and selected equities.

Revenue earnings per share increased by 4.7% to 4.64p, comfortably covering the 4.52p annual dividend. Dividend cover improved to 1.03x from 0.98x a year earlier, while the annual payout increased marginally from 4.51p. The trust has now increased its dividend every year since launch in 2007 and, assuming another increase next year, is on course to qualify as an AIC Dividend Hero.
The portfolio benefited from a number of equity holdings during the year, notably tanker operator Frontline, whose share price more than doubled and whose dividend also increased substantially. Sterling weakness also provided a modest tailwind to overseas income and capital values.

There were setbacks too. Priority 1 Logistics entered liquidation in June after coming under sustained financial pressure, while the managers exited Garfunkelux at a substantial loss after the issuer encountered severe refinancing difficulties.

The trust continues to favour a short-duration approach, which helped insulate it from weakness in longer-dated government bonds as yields rose during the year. Gearing stood at 10.8% at the period end, supported by a £50m loan facility with BNP Paribas, of which £40m was drawn.
The year also marked the start of a portfolio-management transition. Darren Toner was appointed co-manager alongside Ian “Franco” Francis in May 2026. Francis is due to step back from day-to-day management after a 12-month handover period, although he will remain available as a consultant for around three years thereafter.

Looking ahead, the managers expect markets to remain volatile but believe that this should continue to create opportunities in credit. They remain constructive on corporate bonds, citing resilient growth, attractive yields and the trust’s ability to respond to valuation dislocations while focusing on issuers with reliable cash flows and strong balance sheets.

Matthew Read, senior analyst at QuotedData, said: “These are another solid set of results from NCYF. A 10.2% NAV return is a good outcome against a difficult backdrop for bond markets, while the dividend is once again fully covered and the trust remains one of the few investment companies able to issue meaningful amounts of new equity at a premium. The occasional credit setback is to be expected in a high-yield portfolio, but NCYF’s portfolio is well diversified and the long-term record speaks for itself. The short-duration approach has also helped protect the portfolio from rising long-bond yields, while an 8%+ dividend yield and nearly 20 years of uninterrupted dividend growth are compelling.”