CT UK CAPITAL & INCOME: £297m trust set to unveil its 30th year of income growth
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Investment trust CT UK Capital & Income should confirm another year of income growth when it announces its annual results at the end of this month.

Although the exact amount of increase will not be known until details of the final quarterly dividend payment are revealed at the same time as the trust’s results for the year ending September 30, it is likely to be at least 2.5 per cent – maybe significantly more.

It will certainly result in an annual dividend in excess of 12p a share, compared to 11.8p in the previous year. When the increase is confirmed, it will mean that the trust continues to deliver on its promise to shareholders to provide long-term income growth.

It will be the 30th consecutive year that the £297 million trust has increased its annual dividend. Only 14 rival stock market-listed trusts have longer records of sustained dividend growth.

The trust was previously known as BMO Capital & Income, but was rebranded last year following the sale of Bank of Montreal’s asset management business in Europe, the Middle East and Africa to Columbia Threadneedle Investments. 

Global investment house Columbia manages assets of £470 billion. From a dividend perspective, the trust is in good shape with an attractive annual income on offer of four per cent. 

And with nearly a year’s worth of income tucked away in its reserves to bolster shareholder payments when necessary, there is every likelihood that it can keep growing its dividend payments.

Yet CT UK Capital & Income is not a complete investment success story. While investors have been kept sweet on the income front, overall returns – income plus capital gains – have been modest.

Over the past five years, the trust has generated a modest total return of 18.2 per cent – more than its peer group (16.6 per cent) and less than the UK stock market (26.4 per cent).

Julian Cane has managed the trust for more than 26 years and has its assets invested in 45 companies. ‘Over the past five years, the UK stock market has had lots of ups and downs,’ he says.

‘But overall, the FTSE All-Share Index has not advanced much as a result of various headwinds. These winds are still around, but company valuations are looking more attractive than they have done for a while.’

Cane has tinkered little with the fund. He says: ‘I prefer to focus on the investment merits of individual companies rather than build a portfolio based on grand strategic views. 

Of course, it doesn’t make the trust immune from short-term performance blips, but provided the underlying fundamentals of the companies I am invested in remain intact, I’m happy to keep holding them.’

This explains the trust’s big stakes in housebuilder Vistry and buy-to-let lender One Savings Bank.

The only big change in the last couple of years is a new position in analytics company RELX. ‘I bought into the company when its share price was depressed,’ he adds. ‘The reward has been a 50 per cent plus appreciation in the value of the shares. Yes, it doesn’t pay a massive dividend, but it’s a high-quality company.’

As well as its strong income record, the trust has two other investor-friendly features. First, the board is adamant the trust’s shares should not trade at a significant discount to the value of the underlying assets. It does this by buying back shares. 

Over the three months to the end of September, the trust bought back shares on ten separate occasions. ‘The board takes the view the shares of a trust investing in liquid assets should not trade at a discount,’ explains Cane.

Secondly, the ongoing charge is reasonable at 0.59 per cent. The trust’s market ticker is CTUK and its code 346328.

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