Global Wealth Investor

Investing wealth globally

Category: ETF

  • IUKD vs. CTY: A Tale of Two UK Income Strategies

    How does the ETF compare to the investment trust?

    In the landscape of UK equity income investments, two prominent choices for investors are the iShares UK Dividend UCITS ETF (IUKD) and The City of London Investment Trust (CTY). While both aim to provide income and capital growth from UK-listed companies, they represent fundamentally different approaches: passive index tracking versus active management. This distinction is crucial in understanding their total return profiles over various periods.

    Recent Performance at a Glance

    Based on the latest available data, here’s a snapshot of their recent total return performance:

    PeriodiShares UK Dividend UCITS ETF (IUKD) – NAV Total ReturnThe City of London Investment Trust (CTY) – NAV Total ReturnThe City of London Investment Trust (CTY) – Share Price Total Return
    Year-to-date (YTD)~20.4%––
    1 Year~19.2%~15.1%~19.2%
    3 Years~60.3%~44.0%~44.6%
    5 Years~109.1%~92.4%~97.9%
    10 Years~68.4%~109.8%~106.8%

    Note: Data is as of mid-October 2025 and sourced from fund providers. Past performance is not indicative of future results.1

    Dissecting the Numbers and Strategies

    IUKD, as a passive exchange-traded fund (ETF), mirrors the performance of the FTSE UK Dividend+ Index.2 This index comprises the 50 highest-yielding stocks within the FTSE 350, excluding investment trusts.3 Its strategy is straightforward and transparent: to capture the returns of the UK’s top dividend-paying companies.4 This approach has proven effective in the shorter term, particularly in periods favouring high-yield stocks.

    CTY, on the other hand, is an actively managed investment trust with a history stretching back to 1861.5 It is managed by Job Curtis, who has been at the helm for over three decades.6 The trust focuses on a portfolio of predominantly large-cap UK companies with a strong track record of dividend growth.7 This active management allows for flexibility to navigate different market conditions and select companies that the manager believes have long-term potential beyond just a high current yield. The long-term performance of CTY, particularly over a 10-year horizon, showcases the potential benefits of this active approach.

    Key Differences Influencing Total Returns

    Several factors contribute to the differing total return profiles of IUKD and CTY:

    • Management Style: IUKD’s passive nature means its performance is directly tied to its underlying index.8 CTY’s active management allows for stock selection based on in-depth research and a long-term outlook, which can lead to outperformance or underperformance relative to a benchmark.9
    • Portfolio Composition: While both focus on UK dividend stocks, their top holdings show nuanced differences. IUKD’s portfolio is dictated by the index’s methodology, leading to a focus on the highest yielders at a specific point in time.10 CTY’s manager has the discretion to invest in companies with a consistent history of dividend growth, even if their current yield isn’t among the absolute highest.
    • Costs: As a passive ETF, IUKD generally has a lower ongoing charge (around 0.40%) compared to the actively managed CTY (with an ongoing charge of approximately 0.37% but active management comes with other costs).11 Over the long term, these cost differences can impact total returns.
    • Discount/Premium to NAV: As an investment trust, CTY’s share price can trade at a discount or premium to its Net Asset Value (NAV).12 This can impact the shareholder’s total return, as seen in the one-year figures where the share price total return was higher than the NAV total return, indicating a narrowing of the discount or a move to a premium. ETFs like IUKD typically trade very close to their NAV.

    Conclusion: Which is the Better Choice?

    The choice between IUKD and CTY for total returns depends on an investor’s philosophy and time horizon.

    For investors seeking a low-cost, transparent way to gain exposure to high-yielding UK stocks, and who are comfortable with the inherent volatility of such a strategy, IUKD has demonstrated strong performance, particularly in the shorter term.

    For those who favour a long-term, actively managed approach with a focus on companies with a proven ability to consistently grow their dividends, CTY presents a compelling case, as evidenced by its strong 10-year track record.13 The long and successful tenure of its fund manager provides an element of stability and experience.14

    Ultimately, a thorough analysis of both options in the context of an individual’s investment goals and risk tolerance is essential before making any investment decisions.

  • UK Dividend ETFs: A Head-to-Head on Total Return

    UKID vs. UKDV

    For investors focused on total return, which encapsulates both capital growth and dividend income, the UK equity dividend ETF landscape offers several compelling choices. While past performance is not a guarantee of future results, a deep dive into the historical data reveals a close race between two key contenders: the iShares UK Dividend UCITS ETF (IUKD) and the SPDR S&P UK Dividend Aristocrats UCITS ETF (UKDV).

    As of the latest data from summer 2025, both ETFs have demonstrated strong performance, particularly over the past year. The iShares UK Dividend UCITS ETF (IUKD), which tracks the FTSE UK Dividend+ Index of the 50 highest-yielding UK stocks, has shown impressive recent momentum.1 For investors seeking a high immediate income stream that contributes to total return, IUKD is a formidable option.

    Hot on its heels is the SPDR S&P UK Dividend Aristocrats UCITS ETF (UKDV). This ETF follows a strategy of investing in UK companies that have consistently increased or maintained their dividends for at least seven consecutive years. This focus on “dividend aristocrats” can lead to a portfolio of high-quality, stable companies that offer a blend of income and capital appreciation.

    For those with a broader market perspective, the Vanguard FTSE UK Equity Income Index Fund also presents a strong case. While a mutual fund rather than an ETF, its performance provides a valuable benchmark. It tracks the FTSE UK Equity Income Index, offering exposure to a wider range of dividend-paying UK companies.2

    Tale of the Tape: Total Return Figures

    Here’s a snapshot of the total return performance of these funds across different timeframes, based on the most recent available data:

    FundYTD (Year-to-Date)1-Year3-Year (Cumulative)5-Year (Cumulative)Expense Ratio
    iShares UK Dividend UCITS ETF (IUKD)~17.66%~18.19%~38.35%~110.44%0.40%
    SPDR S&P UK Dividend Aristocrats UCITS ETF (UKDV)~9.76%~11.13%~18.71%~41.08%0.30%
    Vanguard FTSE UK Equity Income Index Fund–~16.69% (as of 30/06/24)––0.14%

    Note: Data is based on the latest available information as of August 2025 and may be subject to change. Cumulative returns are presented for 3 and 5-year periods.

    Interpreting the Numbers

    From the data, the iShares UK Dividend UCITS ETF (IUKD) has exhibited a standout performance over the past year and particularly over a five-year horizon. This suggests that its strategy of focusing on the highest-yielding stocks has paid off significantly in terms of total return in the recent economic climate.

    The SPDR S&P UK Dividend Aristocrats UCITS ETF (UKDV), while showing very respectable returns, has a more conservative profile. Its emphasis on dividend sustainability may appeal to investors with a longer-term, lower-risk tolerance. Its lower expense ratio is also a noteworthy advantage for long-term compounding.

    The Vanguard FTSE UK Equity Income Index Fund demonstrates that a broader market approach can also yield strong results, with a very competitive 1-year return and the lowest expense ratio of the three, which can significantly enhance long-term gains.

    Conclusion: Which to Choose?

    For the investor purely focused on the strongest recent and medium-term total return track record, the iShares UK Dividend UCITS ETF (IUKD) currently holds the edge. However, the “best” ETF is subjective and depends on individual investment goals.

    • For aggressive total return: The iShares UK Dividend UCITS ETF (IUKD) has demonstrated impressive growth.
    • For a balance of quality and return: The SPDR S&P UK Dividend Aristocrats UCITS ETF (UKDV) offers a compelling strategy with a focus on sustainable dividends and a lower fee.
    • For broad, low-cost exposure: The Vanguard FTSE UK Equity Income Index Fund provides a diversified and cost-effective way to access UK dividend stocks.

    Investors should conduct their own due diligence, considering their personal financial situation and risk tolerance before making any investment decisions.

  • Unveiling the UK’s Top-Performing Dividend-Paying Equity ETF

    Looking for income?

    For investors seeking a consistent income stream alongside capital growth from the UK stock market, the iShares UK Dividend UCITS ETF (IUKD) emerges as a frontrunner with a robust and lengthy track record. This exchange-traded fund (ETF) has consistently delivered for shareholders, though other strong contenders are worthy of consideration depending on an investor’s specific priorities.

    The iShares UK Dividend UCITS ETF (IUKD) distinguishes itself through its established history, having been launched in 2005.1 It tracks the FTSE UK Dividend+ Index, which is composed of the 50 highest-yielding stocks within the FTSE 350 Index.2 This focus on high-dividend payers has translated into a compelling long-term performance.

    As of the latest available data, IUKD has demonstrated strong returns, with a notable one-year performance and solid returns over three, five, and ten-year periods. Coupled with a significant dividend yield, it presents an attractive proposition for income-focused investors.3 The fund’s total expense ratio (TER) is competitive, although it is a factor to weigh against other options.

    Another prominent name in this category is the SPDR S&P UK Dividend Aristocrats UCITS ETF (UKDV).4 This ETF tracks the S&P UK High Yield Dividend Aristocrats Index, which has a different but equally compelling methodology. It focuses on companies within the S&P Europe Broad Market Index that have followed a managed dividend policy of increasing or stable dividends for at least seven consecutive years. This emphasis on dividend sustainability can be a crucial factor for long-term investors. While its inception date is more recent than IUKD’s, it has also built a solid performance history.

    For those with a broader market approach, ETFs tracking the FTSE 100 and FTSE All-Share indices from providers like Vanguard and iShares also offer exposure to dividend-paying UK companies, as many of the constituents are established, income-generating businesses. While their primary objective isn’t solely high dividend yield, they provide a diversified entry point to the UK equity market with the benefit of dividend distributions.

    Key Considerations for Investors:

    When selecting the “best” UK equity dividend ETF, investors should consider the following:

    • Total Return: This encompasses both capital appreciation and dividend income, providing a holistic view of the ETF’s performance.5
    • Dividend Yield: A crucial metric for income-focused investors, representing the annual dividend per share as a percentage of the current share price.6
    • Expense Ratio (TER): The annual cost of holding the ETF, which can impact overall returns.7
    • Underlying Index and Methodology: Understanding how the ETF selects its constituent stocks is vital for aligning with an investor’s strategy, whether it be a focus on the highest yields or on dividend sustainability.
    • Tracking Difference: The variance between the ETF’s performance and that of its underlying index. A smaller tracking difference is generally preferable.

    Ultimately, the choice between these well-regarded ETFs will depend on an individual’s investment goals and risk appetite. The iShares UK Dividend UCITS ETF (IUKD) stands out for its long and proven track record in delivering high dividend income.8 However, the SPDR S&P UK Dividend Aristocrats UCITS ETF (UKDV) offers a compelling alternative with its focus on dividend sustainability, and broader market ETFs provide a more diversified, albeit less dividend-focused, investment.