The trust whose dividend has increased for 56 consecutive years

While the June dividend increase of 2.6% is miles away from the current inflation rate and we cannot expect the current year increase to be in the 10 %, we can be reassured by the fact that the City of London has increased its dividend by 41.2% in the last 10 years, against a cumulative increase in the consumer price index of 26.5pc.

The trust’s board said it understood “the importance of growing the dividend in real terms throughout the economic cycle.” If he were in fact to pay 20p this year, the yield at last night’s closing price of 398.5p would be 5%, compared to just 3.7% for the FTSE 100.

This share price of 398.5p represents a small premium to the most recent net asset value of 387.8p. The premium may put off potential buyers, but the fact that the City of London has often traded at a premium has allowed it to issue new shares. This spreads the fund’s costs over a wider base, which over time should make the annual load even smaller.

In summary, does the City of London’s windfall revenue outweigh its more day-to-day capital performance?

According to Questor, it is: this above-index yield and the virtual certainty that the dividend will continue to increase each year is extremely valuable, especially for the retirement savers for whom we have tilted confidence. for the first time in 2018.

It might not be an obvious buy at a 2.8% premium, but it’s definitely a long-term hold.

Quaestor says: here

Symbols: CTY

Closing share price: 398.5p

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