Key Highlights

  • City of London Investment Trust PLC (LSE:CTY) offers a Dividend Yield of 3.77% and is a constituent of the FTSE 250 index.
  • The trust raised its dividend for a 60th consecutive year, the longest record of any investment trust.
  • The total dividend for the year to 30 June 2026 rose 4.0% to 22.15p per share from 21.30p.
  • Revenue EPS increased 4.2% to 22.5p, meaning the dividend was fully covered by earnings.
  • Revenue reserves rose by £3.6 million to £52.3 million, equivalent to about 46% of the current annual dividend.

Six Decades of Rising Income

City of London Investment Trust PLC (LSE:CTY) reached a milestone in 2026 that no other investment trust has achieved: 60 consecutive years of dividend increases. The achievement was widely covered across UK financial media, with the Association of Investment Companies describing it as a diamond jubilee for the trust and a demonstration of the resilience of dividend hero investment trusts.

With a dividend yield of 3.77%, LSE:CTY sits within the 2% to 4% range. For many UK income investors, it represents the benchmark for reliable, steadily growing dividends from a portfolio of mainly large UK companies.

FY26 Results: Performance Matches the Market

For the year ended 30 June 2026, City of London delivered a net asset value total return of 21.9%, matching the FTSE All-Share Index. Over three, five and ten years, the trust has beaten the index. Chair Sir Laurie Magnus said the dividend was increased for the 60th consecutive year by 4.0% and was fully covered by Earnings per share.

Commentators noted that the trust benefited from Takeover bids for several holdings and from avoiding stocks such as London Stock Exchange Group and Experian, which derated on fears of disruption from artificial intelligence. On the other hand, not holding Rolls-Royce, which pays a low dividend, cost the trust some relative performance.

Dividend Payments and Growth

The trust pays four quarterly dividends. The fourth Interim Dividend of 5.70p, declared in July 2026 and paid on 28 August, brought the total for the year to 22.15p, a 4.0% increase on 21.30p and ahead of UK Inflation of around 2.6%.

Over 20 years, City of London's dividend has risen by 136.6%, compared with UK CPI inflation of 78.0% over the same period. That record of real income growth is the core of the trust's appeal.

Earnings Cover and Revenue Reserves

Revenue Earnings Per Share increased 4.2% to 22.5p from 21.6p, slightly above the 22.15p dividend. Full cover means the trust did not need to draw on reserves to pay the latest dividend.

Revenue reserves increased by £3.6 million during the year to £52.3 million, around 10.2p per share or 46% of the current annual dividend. Investment trusts can retain up to 15% of income each year, and these reserves can be used to support dividends during difficult periods, as City of London did during the pandemic.

Investment Approach

Fund manager Job Curtis, who has managed the trust since 1991, and deputy Fund Manager David Smith invest predominantly in UK companies, with a bias towards large, well-established businesses with strong balance sheets and the ability to pay and grow dividends. The managers combine higher-yielding stocks with companies capable of stronger long-term Capital and dividend growth.

The trust also benefits from low costs and the advantages of the investment trust structure, including the ability to use low-cost long-term debt.

A Changing Income Landscape

One theme highlighted in the results is the trend among UK companies to return cash through share Buybacks rather than special dividends. Special Dividend income received by the trust fell during the year, reflecting this shift. While buybacks can support share prices, they do not directly generate income for a dividend-focused trust, which makes underlying portfolio dividend growth all the more important.

Market Sentiment

With a Market Capitalisation of around £2.9 billion, City of London is the largest UK Equity income investment trust. Its shares typically trade close to net asset value, often at a small premium. On investor forums and social platforms, it is regularly cited as a core holding for income investors and those building a portfolio for retirement.

Risks to the Dividend

The main risks are a sharp downturn in UK corporate dividends, concentration in large UK sectors such as banks, energy and consumer staples, and the use of gearing. A prolonged period of weak dividend growth could slow the rate of increases, although revenue reserves provide a buffer.

What to Watch Next

Investors will next watch the quarterly dividend declarations for the 2027 financial year to confirm a 61st year of growth. The half-year results to December 2026 will update revenue earnings and reserves, providing an early guide to cover for the year ahead.

Verdict: Is the 3.77% Yield Sustainable?

City of London Investment Trust PLC (LSE:CTY) offers a 3.77% dividend yield that is fully covered by earnings and backed by revenue reserves equal to almost half a year's payout. With 60 consecutive years of increases and a conservative approach, the dividend looks highly sustainable. For FTSE 250 income investors seeking dependable, inflation-beating income, LSE:CTY remains one of the most trusted Options in the UK market.