Against a ‘challenging’ market backdrop, CT UK Capital and Income (LON:CTUK) underperformed its benchmark in the half to March. However, the UK equity income trust raised the H1 dividend by an inflation-beating 5.1% to 6.2p. This extended the fund’s long-standing track record of dividend growth.
In fact, this AIC ‘Dividend Hero’ is on course to deliver a 33rd consecutive annual dividend increase. New manager Dominic Younger is anticipating a higher level of income receipts in H2.
Why the trust lagged in H1
H1 figures showed a net asset value (NAV) total return of 0.6%, lagging the FTSE All-Share Index’s 8.9% return over the same period. CTUK also suffered a negative share price total return of 1.2% as the NAV discount widened from 2.9% to 5.8%.
Against a volatile market backdrop, performance was impacted by the portfolio’s underweight exposure to big benchmark constituents that drove index returns. These included pharmaceutical giant AstraZeneca (LON:AZN), oil and gas majors BP (LON:BP.) and Shell (LON:SHEL), and banking behemoth HSBC (LON:HSBA).
Another poor portfolio performer was Burford Capital (LON:BUR), which slumped 65% after an adverse litigation outcome.
New dawn under Dominic
While the H1 outcome proved disappointing, investors hope Younger can engineer a return to form for the trust. Since taking over from the long-serving Julian Cane on 1 January 2026, he has overseen an evolution of the portfolio which should improve performance.
Younger seeks to enhance income generation and deliver sustained capital and income growth through a ‘value contrarian approach’. As such, CTUK’s portfolio is expected to be balanced across stocks at varying stages of their strategic turnarounds.
He continues to ‘hold conviction in the under-recognised value’ in the companies held across the portfolio, particularly among the domestically-focused names.
Nicky McCabe, chair, said: ‘Our contrarian theses in positions like specialty chemicals company Croda (LON:CRDA), pest control business Rentokil (LON:RTO), drug company GSK (LON:GSK) and beverages leader Diageo (LON:DGE) are showing promising signs of progress.’
Patient investors should look past the H1 performance blip at CTUK, which enters its next chapter in safe hands.
Under Cane, the trust delivered robust long-term returns, combining capital growth with a consistently rising income stream. Younger worked closely alongside the well-regarded Cane, hoovering up knowledge. He is also well embedded within Columbia Threadneedle’s UK Equity Income team.
Income-hungry investors should take a closer look at the trust, which has a long track record of growing dividends ahead of inflation.
Learn more about CT UK Capital & Income here: https://www.columbiathreadneedle.com/uk-capital-and-income-investment-trust-plc/
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