Argo Investments (ARG), the country’s second biggest listed investment company, has lifted its final dividend after reporting a near 12% rise in profit for the year to June 30.
The Adelaide-based company said net profit was an all time record high of $195.9 million.
As a result, final dividend was boosted one cent a share, or 7.4% to 14.5c a share.
After the half a cent a share rise in the interim, total dividends for the year to June will be 28c a share, up 5.7% from 2012-13’s 26c a share.
The market took the solid result in its stride, on a day when shares again weakened. Argo shares rose 0.2% to $7.72.
ARG 1Y – Argo delivers on dividends
The record profit (the highest in the company’s 68 year history) compared with $175 million in 2012‐13 and $167.3 million in 2011‐12. It took Argo’s earnings per share to 30.2c from 27.7c in the previous year.
Argo’s Managing Director Mr Jason Beddow said in a statement the improved result reflected increased dividends and distributions from the investments in the Company’s portfolio.
"The result was also boosted by $6.9 million of non‐cash, one‐off income items, being two dividends resulting from the demergers of Recall Holdings and Orora by Brambles and Amcor respectively, and a special dividend due to the in‐specie distribution of Sydney Airport securities by Macquarie Group to its shareholders.
"This compares to a demerger dividend of $0.6 million in the previous year, when Woolworths demerged SCA Property Group," he said.
Argo said that over the year to June, its share price performance (assuming dividends paid are reinvested) returned +22.7%, "reflecting a combination of stronger equity markets and the Company’s share price moving to a premium to NTA”.
Argo’s investment portfolio performed in line with the broader Australian share market, rising 17.1% for the year after deducting all administration expenses and tax, compared with the S&P/ASX 200 Accumulation Index which was up 17.4% for the same period without taking into account any costs or tax.
The company said the Share Purchase Plan and Dividend Reinvestment Plan were well supported by shareholders during the year and raised $99.6 million and $33.1 million respectively for further investment. Argo now has over 73,000 shareholders and more than 660 million shares on issue.
Mr Beddow said Argo spent $259 million during the year on long‐term investment purchases, partly funded by $111 million in disposals and takeover proceeds.
“A feature of the past financial year has been the high level of initial public offerings (IPOs). Argo’s investment team analysed a large number of opportunities and has established positions in Affinity Education Group, Asaleo Care, Monash IVF Group, Pact Group, Steadfast Group and 3P Learning,” Mr Beddow said.
“We also invested in Managed Accounts Holdings prior to its recent IPO and added Tassal Group to the portfolio. Overall, the number of stocks held in the portfolio increased to 103 during the year,” he said.
The best performing stocks in the portfolio over the year were Challenger, Lend Lease Group, David Jones, Technology One and Macquarie Group, all of which increased in price by more than 50%.
"This was somewhat offset by relatively poor performances from Whitehaven Coal, Mermaid Marine Australia, Fleetwood Corporation and iSelect, which all fell by over 30%," he said.
Looking to the coming year, Mr Beddow sounded a note of caution about the sustainability of dividend payouts from Australian companies.
“We note that dividend payout ratios in the Australian market remain elevated.
"As a result, earnings growth will be required to drive further dividend growth.
"We also consider that earnings growth will be necessary to justify current market valuations," he said.
With no debt and cash reserves of $195 million, Argo’s CEO said the company remains well placed.
"We look forward to meeting our investee companies over the upcoming corporate results reporting season and will continue to selectively invest funds into quality, well managed companies with solid cash flows and dividend streams,” Mr Beddow said.
