Special Dividends Flow From LICs

By Glenn Dyer | More Articles by Glenn Dyer

Like Australian Foundation Investment Co (AFIC), its smaller listed investment company offshoot, AMCIL has seen its December half-year results saved by the BHP and Rio off-market share buybacks.

AFIC on Monday reported a surge in December half revenue to $250 million (from just over $96 million in the December 2017 half year) thanks to the flood of cash from the buybacks from the two big miners. Around $120 million flowed to AFIC from the two miners and by using up franking credits AFIC will pay an 8 cents a share special dividend on top of the unchanged 10 cents a share interim.

AFIC’s after-tax profit was $239.8 million up 75.4% on the previous corresponding period’s $136.7 million. AFIC’s six-month portfolio return, including franking, was negative 6.4%. For 12 months including franking, it was negative 2.3%.

That was a little worse than the performance of the key comparator for the company, the ASX 200 Accumulation Index. Over the two these periods, including franking, that index fell 6.2% and 1.4% respectively. AFIC’s performance numbers are after costs

On Tuesday, AMCIL said its profit for the six months to December was $3.7 million, up 43% from $2.6 million for the same period in 2017.

The buy-backs added $4.5 million to the investment income and AMCIL will give investors a 1.5 cent special dividend to share the proceeds.

It also declared a 2 cent fully franked dividend, taking the total dividend to 3.5 cents payable next month (against the 18 cents a share from AFIC off a much bigger portfolio).

“The recent fall in the market means that better value is now on offer. While this has presented some opportunities, we are also conscious that uncertainty prevails on a number of fronts,” CEO Mark Freeman said in a letter to shareholders.

“These include the impact of Chinese economic growth, the direction of US interest rates, the course of trade talks between the US and China, and the outlook for the Australian economy in an environment of falling house prices and a Federal election.”

AMCIL has now sold out of Nufarm, Fisher & Paykel, Dulux, ALS, AMCOR, and InvoCare.

It has bought into Sydney Airport, Ramsay Health Care, and Starpharma Holdings. It’s biggest holding is $13.2 million worth of CSL.

Amcil shares rose 2.3% to 87 cents.

Last week, another AFIC stablemate, Mirrabooka Investments also paid out a special dividend from its surplus of franking credits.

Mirrabooka’s profit for the half-year was $4.62 million, down 16.2% down on the previous corresponding period.

“The major difference was the decreased contribution from the trading portfolio during the half, which showed a loss before tax of $0.1 million compared to a gain of $1.8 million in the previous corresponding period,” directors said.

Revenue from operating activities was $5.18 million, 0.9% up on the previous corresponding period. This excludes capital gains on investments.

The interim dividend of 3.5 cents a share fully franked (at 30%) was the same as last year’s interim dividend, plus a special dividend of 10 cents will be paid on February 15.

“The special dividend is sourced from capital gains, on which the Company has paid or will pay tax. The amount of the pre-tax attributable gain, known as an “LIC capital gain”, attached to this dividend is 14.29 cents (10 cents grossed up by 30% franking rate).

“This enables some shareholders to claim a tax deduction in their tax return. Further details will be on the dividend statement,” directors said.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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