Most of my share portfolio consists of individual companies. But I am also always on the lookout for investment trusts I can add to it. One FTSE 250 share on my radar for the coming month is a long-established investment trust that offers a yield of over 5%.
Long streak of dividend increases
The stock in question is the City of London Investment Trust (LSE: CLIG).
The attraction to me of such a pooled investment is that it offers exposure to a diversified range of companies. City of London, for example, owns dozens of shares including blue-chip names like Shell, BAE Systems and Unilever.
So although it is a FTSE 250 share, owning it would also offer me exposure to a host of FTSE 100 businesses without needing to buy them directly for my portfolio.
Over time, the trust aims to grow both income and capital value. In the past five years, however, the share price has fallen 23%.
On the dividend front, things are more promising.
The board says that it “fully recognises the importance of dividend income to shareholders”. The trust has raised its payout annually for 57 years. That makes this share one of the longest-performing Dividend Aristocrats on the London market.
Future prospects look mixed
However, past performance is not a guide to what will happen in future.
On one hand, I think the trust’s mixture of leading and mid-sized UK-listed companies could help me benefit from what I see as attractive valuations in the UK market.
On the other hand, the economy continues to look weak. Just because shares are cheap does not mean that they cannot get cheaper still.
I see a risk that, if the FTSE 100 performs poorly in the coming years, that could hurt the City of London Investment Trust share price.
Although the managers at the trust are paid to choose individual shares they think have good prospects, that does not necessarily mean that they will outperform the wider market. The past five-year record illustrates that all too clearly.
I’d consider buying this November
Nonetheless, I like the idea of owning this stock in my portfolio. While a long history does not necessarily indicate what will happen in future, the trust has had a stellar dividend run. Its management team has deep experience in the UK stock market.
Over the long term I think it could offer me exposure to a UK stock market I think looks attractively valued. The yield is also appealing to me.
Although dividends are never guaranteed, I expect the trust managers to work hard to continue the decades-long pattern of annual increases. That is a key focus for many of the trust’s shareholders.
If I had spare cash to invest this November, I would consider buying some City of London Investment Trust shares for my ISA or SIPP.
