They say shares are for optimists, bonds are for pessimists. I have become a little less optimistic on equities over the past year which is why I have reduced the mix to 50:50 (from 60:40 previously).
Similar to my other holding in this sector, City Merchants investment objective is to seek to obtain both high income and capital growth from investment, predominantly in fixed-interest securities.
It is almost three years since I purchased this IT for my ISA as a replacement for a few sales from my shares portfolio.
The overall portfolio is fairly defensive with a significant proportion of higher quality companies which the management consider to be ‘default-remote’.
Net assets have steadily increased over the year and taking the full year dividend of 10p per share into account, the total return was 9.9% (2016 11.6%). Over the past 5 years, the return has been 49.7%.
|CMHY 3 Year Share Price (click to enlarge)|
The dividend target for the trust is 10p per share paid quarterly. This amount was paid in each of the previous four years and remains the target for the coming 12 months. At the current price of 177p the shares offer a yield of 5.6% which is obviously attractive compared to the rates on offer from our banks and building societies. The average cash ISA rates are starting to increase but only offer a miserly 1.2% according to latest figures from Moneyfacts. In 2007, the average rate was 5.0%.
Of course, the share price will move around as can be seen from the chart. In recent weeks there has been some weakness and the share price has moved from a 2% premium to an 6% discount which has resulted in the yield becoming more attractive.
Regardless of the share price fluctuation, the trust provides some diversity to equities and a steady and predictable quarterly income stream for my portfolio.