Shareholders in Argo Investments (ASX:ARG), the country’s second-largest listed investment company, will receive a slight increase in dividend income for the year ending June 30. This comes after a modest rise in earnings during the same period.
The financial dividend has been raised to 18 cents per share, up from 17 cents in the previous year. As a result, the total yearly return per share has reached 34.5 cents, compared to the previous 33 cents.
Net income experienced an 8.2% growth, totaling $271.1 million, an improvement from the $251.2 million reported in the previous year.
However, the statutory profit saw a decline of 13.2%, dropping to $271.1 million from the $312.9 million recorded the previous year. The prior year's figures were influenced by a one-time, non-cash income of $61.7 million due to the merger of BHP’s oil and gas assets with Woodside Energy and Tabcorp’s demerger of The Lottery Corporation.
Argo reported that its investment performance, assessed through net tangible assets (NTA) after deducting all costs and adjusted for company tax paid, was +11.4%. This contrasts with the S&P/ASX 200 Accumulation Index, which yielded +14.8% returns, not accounting for any costs.
In Monday's announcement, Argo explained, "The relatively lower performance of the portfolio this year reflects a shift in investor sentiment towards growth-style investments. Argo’s investment strategy, on the other hand, favors more established businesses capable of maintaining and increasing their dividends."
"All industry sectors generated positive returns, with Technology standing out by surging over 30%. Companies associated with lithium and other battery minerals also exhibited notably strong returns. Conversely, sectors with defensive attributes, like Utilities and Health Care, lagged behind the broader market," Argo stated.
"Market volatility during the year created opportunities for purchases, primarily to add to existing portfolio positions. However, the total value of transactions (both sales and acquisitions) remained modest compared to previous periods."
Some notable purchases throughout the year included Allkem (initial purchase), BHP Group, CSL, GUD Holdings, IDP Education, Santos, Stanmore, and Viva Energy. Sales included Australian United Investment Co and Diversified United Investments, among others. Positions in Pact Group and Tabcorp were completely divested, and Tassal shares were sold due to a takeover.
These transactions resulted in the portfolio size decreasing from 93 to 89.
Looking ahead, Argo commented that, "While current investor sentiment suggests that Australia and the global economies are likely to avoid recession, we anticipate further share market volatility. Additionally, growth is expected to be subdued over the medium to longer term."
"With a debt-free status, available cash, and a diversified portfolio of high-quality stocks, Argo is well-equipped to navigate these conditions. We will apply our conservative, long-term investment approach to identify and invest in quality companies."
