Melbourne-based Listed Investment Company Djerriwarrh Investments lifted its final dividend to soften the impact of a lower interim dragging down its full year payout to shareholders.
That was after the company told the ASX on Monday that full-year profit slipped 7.3% to $30.5 million for the year to June.
Djerriwarrh said it lifted its final dividend to a fully-franked 5.75 cents a share, up half a cent from the year before.
That took the fully year payment for 2020-21 to 11 cents a share, down from 14 cents a share a year ago.
Like its stablemate Mirrabooka last week, Djerriwarrh depended on its trading activity to make up for a fall in revenue from dividend income (and the absence in special payouts we saw in 2019-20).
Djerriwarrh said profit fell 7.3% to $30.5 million for the year to June 30 as a decline in investment income outweighed a jump in income from option activity. Revenue from operating activities was $28.0 million in the year, 2.1% down from the previous corresponding period.
Djerriwarrh said its return for the 12 months including franking was 29.6%, just ahead of the S&P/ASX 200 accumulation index return of 29.1%.
“The ongoing strength of the market, despite a number of uncertainties, has been a feature over the year as very low interest rates have combined with better investor sentiment from improved economic conditions.
“This has driven up valuations and share prices, in some instances, to record highs,” the company said in Monday’s release.
The company said its major share sales for the 12-month period predominantly resulted from the exercise of call options. This included positions in BHP, Macquarie Group and holdings in each of the four major banks.
“The bank sector performed extremely well during the year, mostly as a result of a vastly better bad debt outcome compared to what was anticipated at the start of the pandemic,” the company said.
“The better economic outlook has also contributed to each of the major banks having very strong capital positions.“
During the year the company also sold a number of holdings as a result of option exercises and active selling, including South32, QBE, Qube Holdings, Suncorp, Reliance Worldwide Corporation and Scentre Group.
Major purchases for the 12-month period included ASX Ltd, CSL, Westpac, Woolworths, EQT, and Carsales.com.
“A number of new companies were also added to the portfolio. This included positions in Equity Trustees, Mirvac Group, AUB Group and Pinnacle Investment Management Group, all of which provide a good balance of income and growth.
“We also established modest sized positions in companies where we see the potential for long term capital growth, including Fisher & Paykel Healthcare, ResMed, NetWealth, Temple & Webster and FINEOS Corporation. Djerriwarrh also participated in the initial public offering of PEXA Group,” the company said on Monday
Djerriwarrh said the outlook for dividends across the Australian share market was mostly positive heading into the 2020-21 reporting season, and after tax, the 2021-22 interim season next February.
Djerriwarrh said it expects the rebound in bank dividends to largely continue, supported by a recovering economy and more sustainable dividend payout ratios.
“There is also the potential for capital returns as a result of their strong balance sheets.
“High iron ore prices may also provide ongoing strong dividend income from BHP and Rio Tinto.“
However it said some companies are unlikely to resume dividend payments in the near term, including Sydney Airport and Auckland Airport. To that you could add the travel sector and Qantas.
The other key factor in determining income for the year is option activity which is influenced by market volatility and the level of interest rates.
“Based on current conditions, our expectation for option income as compared to that achieved in financial year 2021 is currently more subdued,” directors said.
The shares lost 0.3% to $3.09.
