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The City of London Investment Trust (LSE:CTY) is a dividend share with a difference. Incredibly, since 1966, it’s managed to increase its payout to shareholders each year. This means it holds the record for the longest unbroken run of dividend growth of any UK stock. And yet it doesn’t do anything clever. It simply invests in other equities listed primarily on the London Stock Exchange.
At 30 April 2025, it held 79 individual positions with a market value of £2.38bn. Its three biggest holdings — accounting for 13.5% of the fund — were HSBC (£111.4m), Shell (104.3m) and RELX (103.7m).
| Country | No. Holdings | Market value at 30.4.25 (£m) | Cost at 30.4.25 (£m) | Unrealised gain at 30.4.25 (£m) |
|---|---|---|---|---|
| UK | 69 | 2,184 | 1,658 | 526 |
| USA | 4 | 50 | 32 | 18 |
| Switzerland | 2 | 42 | 24 | 18 |
| Germany | 2 | 59 | 21 | 38 |
| France | 1 | 26 | 20 | 6 |
| Hong Kong | 1 | 19 | 15 | 4 |
| Total | 79 | 2,380 | 1,770 | 610 |
The case for domestic equities
With the UK market offering some of the best yields around, it makes sense for an income-focused investment trust to concentrate on domestic companies. Presently (13 June), the stock’s yielding 4.36%.
But there’s more to the trust than dividends. Its objective is to provide long-term growth in income and capital.
Since April 2015, its share price has grown 86%. This ignores the impact of reinvesting the dividends received, a process known as compounding.
In fact, the trust’s manager, Janus Henderson Investors, remains bullish. It says: “We think the valuation of UK equities is compelling compared with equivalents overseas”. It also notes that domestic stocks are “relatively less affected” by tariffs due to their focus on services.
In addition, it claims that the global nature of the stocks held by the trust — it estimates two-thirds of their revenue is earned overseas — helps provide a more diversified portfolio. It anticipates further interest rate cuts by the Bank of England over the next 12 months, which should further boost valuations.
Possible issues
But despite the impressive record of the trust’s investment manager, it doesn’t have an unblemished record.
Looking at its 69 UK holdings, 30 are currently showing a paper loss. Three of them have lost more than half their value — XP Power (58%), Vodafone (56%) and Glencore (52%).
It also has to be remembered that dividends are never guaranteed. And just because a stock’s been able to increase its payout every year for nearly six decades, it doesn’t mean this will continue. The trust’s exposed to the same global uncertainty that affects all investors.
My verdict
But investment companies — including real estate investment trusts — are a great way of spreading risk through a single shareholding. According to the Association of Investment Companies, there are 96 of them on the FTSE 350.
They have a reputation for delivering consistent returns over a long period, which makes them popular with pension fund managers.
And as you would expect of a trust investing in other quoted companies, its shares are trading very close to its net asset value. Therefore, taking a position isn’t about getting something cheap. Instead, the investment case is built around a belief that quality UK companies will continue to perform over the long term.
On this basis, investors who have confidence in the prospects for UK equities — and want exposure to several blue chip companies through a single shareholding – could consider adding the stock to their portfolios.
