AFIC Reports 2.7% Profit Rise to $154.2M, Raises Dividend to 12 Cents
Australian Foundation Investment Company (AFIC) reported a 2.7% rise in half-year profit to $154.2 million and increased its interim dividend to 12 cents per share, while its portfolio outpaced the S&P/ASX 200 over the past year.
- Half-year profit after tax up 2.7% to $154.2 million
- Interim dividend increased to 12.0 cents per share, fully franked
- 12-month portfolio return of 13.2%, outperforming S&P/ASX 200 Accumulation Index
- Strategic portfolio adjustments including increased holdings in BHP, Woodside, Telstra
- Cautious outlook amid market volatility and subdued economic growth
Solid Half-Year Financial Performance
Australian Foundation Investment Company Limited (AFIC) has delivered a steady financial performance for the half-year ended 31 December 2024, with profit after tax rising 2.7% to $154.2 million compared to the prior corresponding period. Earnings per share increased to 12.3 cents, underpinning an interim dividend of 12.0 cents per share, up 0.5 cents from last year, reflecting AFIC's commitment to growing shareholder returns.
The dividend remains fully franked, maintaining the company's focus on delivering tax-effective income to investors. The interim dividend will be paid on 25 February 2025, with participation options available through the Dividend Reinvestment Plan and Dividend Substitution Share Plan at no discount to market price.
Portfolio Performance and Market Positioning
AFIC's portfolio returned 7.2% over the half-year, slightly trailing the S&P/ASX 200 Accumulation Index's 7.6% return. However, over the 12 months to December 2024, AFIC outperformed the benchmark with a 13.2% return versus 12.7%, both figures including franking credits. This outperformance was driven by strong contributions from holdings such as Netwealth Group, Fisher & Paykel Healthcare, ResMed, Wesfarmers, JB Hi-Fi, Goodman Group, and Macquarie Group.
The company strategically increased its stakes in key stocks including BHP, Woodside Energy Group, Telstra Group, Cochlear, James Hardie Industries, and WiseTech Global during periods of short-term negative sentiment, capitalising on attractive valuations. Conversely, AFIC exited positions in Ramsay Health Care, Domino's Pizza Enterprises, and Mineral Resources, citing structural challenges and governance concerns.
International Exposure and Future Plans
AFIC’s global portfolio, initiated in May 2021 and currently representing about 1.6% of the total portfolio, has exceeded its benchmark, the MSCI World Index ex Australia. The company is evaluating options to potentially launch a separate low-cost global investment company, signalling an ambition to expand its international footprint.
Outlook Amid Market Uncertainty
Looking ahead, AFIC acknowledges heightened geopolitical tensions and upcoming elections in developed markets as sources of potential volatility. Economic growth and consumer confidence are expected to remain subdued, with inflationary pressures easing but still present. AFIC’s management remains cautious, emphasising disciplined capital allocation and a focus on quality companies with strong balance sheets and sustainable competitive advantages.
Despite the more fully priced Australian equity market following two strong years, AFIC intends to leverage market volatility to acquire quality assets at attractive prices, consistent with its long-term investment philosophy.
Bottom Line?
AFIC’s disciplined approach and dividend growth signal resilience, but cautious investors should watch for market volatility ahead.
Questions in the middle?
- How will AFIC’s potential launch of a separate global investment company impact its portfolio diversification?
- What are the implications of AFIC’s reduced exposure to major banks on future income stability?
- How might ongoing geopolitical tensions and economic uncertainties affect AFIC’s portfolio allocation strategy?
