CT UK HIGH INCOME: Results on the rise… now the trust needs to add the missing part of the puzzle

The CT UK High Income investment fund is a provider of attractive income, primarily from a portfolio of high-yielding UK shares.

Recent results indicate that, under a new trustee, this trust can generate income against a backdrop of increasing capital returns, something the trust has struggled to achieve in recent years.

Half-year results published at the end of last month show that in the six months to the end of September, the trust reported overall share price returns of 9.4 per cent, compared with 6.1 per cent for the FTSE All index -Share, your reference point.

“We are pleased to report the company’s benchmark outperformance over this period as the UK market remained resilient to the ongoing wider geopolitical instability,” said Andrew Watkins, chairman of the trust.

The stock market-listed trust has been managed since July last year by David Moss, a portfolio manager at Columbia Threadneedle (CT) Investments who also manages the CT Select UK Equity Income Fund.

“What we’re trying to do for shareholders is deliver a high level of income and also grow it,” he says, “while offering the prospect of capital growth.” It is certainly delivering results on the revenue front. The trust’s shares, capitalized at £74 million, currently provide a dividend equivalent to 6.5 per cent per annum.

It has also managed to increase annual dividend payments for 11 years in a row. The missing part of the puzzle is the long-term growth of the trust’s share price. In the last five years, it is down almost 5 percent.

The trust’s board hired Moss to improve total shareholder returns. And while the half-year results indicate that performance numbers are heading in the right direction, he knows more needs to be done. “We need to generate more capital growth over a longer period,” he says.

The trust is currently invested in 40 stocks and more than 75 per cent of its assets are in FTSE100 shares. Although it has big dividend-friendly names such as Shell, HSBC and insurers Phoenix and Legal & General, Moss says the portfolio is more diverse than it perhaps appears in the eyes of many investors.

Some of its shares, for example, are listed on the FTSE250 index, such as brick manufacturer Ibstock, or are dual-listed (Irish housebuilder Cairn Homes, whose shares are listed on the UK and Irish stock markets). Both have performed well over the past year, with their shares rising 44 and 64 percent respectively.

The portfolio also contains some European stocks: French industrial conglomerate Schneider Electric, German software company SAP and Dutch semiconductor specialist ASM International (not to be confused with ASML).

“We can invest up to 10 percent of the portfolio in foreign stocks,” explains Moss, “but it is currently limited to those three holdings.” Firstly, because we only invest in overseas companies if they offer something we can’t get from a UK company. Also, from an investment potential point of view, all the value is in the UK.”

Moss has mixed opinions about the Government. Although he admits to being “disappointed” by the National Insurance costs that Chancellor Rachel Reeves has imposed on businesses, he hopes “all the bad news is now out there”.

As an investment manager who also runs a European offshore fund for Columbia Threadneedle, Moss says the UK is a better investment proposition than Europe.

The trust pays income quarterly. The stock market identification code is B1N4G29 and the symbol CHI. Total annual charges are 1.6 per cent (source: Hargreaves Lansdown).