Key Highlights

  • CQS New City High Yield Fund Ltd (LSE:NCYF) trades on the London Stock Exchange Main Market with a Dividend Yield of 9.40%.
  • Revenue Earnings Per Share rose 4.7% to 4.64p for the year to 30 June 2026, covering the 4.52p annual dividend.
  • Dividend cover improved to 1.03x from 0.98x a year earlier.
  • The trust has raised its dividend every year since launch in 2007 and is on course to become an AIC Dividend Hero.
  • The fourth Interim Dividend for 2026 was set at 1.52p against 1.51p a year earlier.
  • Shares traded at a premium to net asset value, allowing the trust to issue £36.8m of new Equity during the year.

Overview of CQS New City High Yield Fund

CQS New City High Yield Fund Ltd (LSE:NCYF) is one of the most closely watched high-income Investment companies on the London Stock Exchange. Managed by Ian "Franco" Francis, now joined by co-manager Darren Toner of Manulife | CQS Investment Management, the trust invests mainly in high-yielding fixed interest securities, with a smaller sleeve of income-producing equities. Its stated objective is to deliver a high gross dividend yield with the potential for Capital growth.

With a dividend yield of 9.40%, LSE:NCYF sits near the top of the UK income tables. The key question for investors is whether a yield this high reflects genuine earning power or simply a share price under pressure. The latest annual results give a clear answer: the dividend is being paid from income, not capital.

Latest Results and Dividend Payments

For the year to 30 June 2026, CQS New City High Yield Fund delivered a net asset value total return of 10.2% and a share price total return of 10.1%. NAV per share edged up to 48.55p from 48.37p, while the shares closed the period at 51.80p, a premium of 6.7%.

The most important number for income investors is Revenue earnings per share, which increased by 4.7% to 4.64p. That comfortably covered the 4.52p annual dividend, lifting dividend cover to 1.03x from 0.98x a year earlier. The trust paid three quarterly dividends of 1p each, followed by a fourth interim dividend of 1.52p, up from 1.51p in 2025, payable on 28 August 2026.

Dividend Growth Track Record

Dividend growth is the backbone of the LSE:NCYF investment case. The board has increased the dividend every year since the fund launched in 2007. Assuming another increase next year, the trust is on course to qualify as an AIC Dividend Hero, a status reserved for investment companies that have raised payouts for 20 consecutive years.

The pace of growth is deliberately modest, with the annual payout moving from 4.51p to 4.52p. This reflects discipline: the board matches payout growth to the income the portfolio actually generates.

Cash Flows and Portfolio Income

The trust's Cash Flow comes from bond coupons and equity dividends. During the year, several equity holdings boosted returns, notably tanker operator Frontline, whose share price more than doubled and whose dividend increased substantially. Weaker sterling also provided a modest lift to overseas income.

The managers have kept the portfolio actively traded. Recent activity included adding to bonds such as Pizza Express 9.875% 2029 and Deutsche Pfandbriefbank 5.75% perpetual, participating in a new Hampshire Trust Bank AT1 issue with a 10% coupon, selling Aston Martin 10.375% 2029 and buying Virgin Media 7.875% 2032. These high coupons are the engine of the dividend.

Premium Rating and Equity Issuance

A rare advantage for NCYF is that its shares trade at a premium to NAV. That premium allowed the trust to issue £36.8m of new equity during the year. New shares issued above NAV are accretive for existing holders, and the cash raised is invested into fresh high-coupon bonds, helping protect revenue per share.

Risks to Dividend Sustainability

High-yield Credit carries real risks. If credit spreads widen sharply, or if defaults rise in a weaker economy, bond prices can fall and some coupons can be lost. The managers themselves expect markets to remain volatile. The UK backdrop has also been uneven, with the private sector struggling in June 2026 before showing signs of improvement in July, and investors are watching the policy direction of the new UK government.

The portfolio's short-duration approach helps limit sensitivity to rising long-term gilt yields. Diversification across many issuers also reduces the damage from any single default. QuotedData analyst Matthew Read noted that occasional credit setbacks are expected in a high-yield portfolio, but that NCYF's portfolio is well diversified and its long-term record speaks for itself.

Is the 9.40% Yield Sustainable?

Based on the latest figures, the 9.40% yield on CQS New City High Yield Fund looks sustainable in the near term. Revenue earnings exceed the dividend, cover has improved, and the trust can raise new capital at a premium. The main threats are a sharp credit downturn or a loss of the premium rating, which would remove the issuance tailwind.

Investors should expect slow and steady dividend growth rather than large increases. For those seeking high, regular income from a diversified credit portfolio, NCYF's record and current cover make it one of the more dependable high yielders on the London Stock Exchange.