Why Did Djerriwarrh Raise Dividends Despite Lagging ASX 200 Returns?
Djerriwarrh Investments Limited has raised its fully franked final dividend to 8.25 cents per share, delivering an enhanced yield well above the ASX 200, despite a portfolio return that lagged the broader market. The company’s strategic portfolio adjustments and option income underpin its income-focused approach.
- Final dividend increased by 3.1% to 8.25 cents fully franked
- Total dividends for FY2025 at 15.5 cents per share, up from 15.25 cents
- Portfolio return of 7.8% including franking, underperforming ASX 200’s 15.1%
- Underweight in major banks and net cash position impacted relative performance
- Option income remains a significant contributor at $16.7 million
Dividend Lift Reflects Income Focus
Djerriwarrh Investments Limited has announced a 3.1% increase in its fully franked final dividend to 8.25 cents per share for the year ended 30 June 2025. This brings total dividends for the year to 15.5 cents per share, slightly up from 15.25 cents the previous year. The dividend yield, when including franking credits, stands at an attractive 6.5% based on net asset backing, outperforming the S&P/ASX 200 Index yield by 2.3 percentage points.
Portfolio Performance and Market Positioning
Despite the dividend increase, Djerriwarrh’s portfolio return for the year was 7.8% including franking credits, trailing the ASX 200 Accumulation Index’s 15.1% return. The relative underperformance was largely attributed to the company’s underweight stance in major banks, notably the Commonwealth Bank of Australia, which experienced strong gains during the period. Additionally, Djerriwarrh maintained a net cash position for most of the year amid high market valuations, which further dampened relative returns.
The company’s strategy involves a disciplined approach to portfolio construction, balancing enhanced dividend income with long-term capital growth. This year saw active portfolio management through call option exercises that led to the sale of holdings in several major banks and other stocks, with proceeds reinvested into high-quality companies such as Rio Tinto and BHP, which offer attractive fully franked dividend yields.
Option Income and Expense Management
Option writing remains a core income-generating strategy for Djerriwarrh, contributing $16.7 million to total income, marginally ahead of the previous year. The company maintained an average call option coverage of 40%, at the upper end of its target range, providing a steady income stream while managing exposure to capital growth opportunities. The management expense ratio was a low 0.47%, reflecting efficient cost control.
Balance Sheet and Outlook
Djerriwarrh’s balance sheet remains robust with net assets of $877.8 million and a net cash position of $43 million at year-end. The company’s cautious stance on market valuations and its focus on dividend income position it well to navigate ongoing market uncertainties. Management highlighted the potential for increased option income and the importance of deploying cash into high-quality dividend-paying stocks in the coming year.
Shareholders can expect the final dividend payment on 26 August 2025, with shares trading ex-dividend from 7 August. The company will provide further insights during its shareholder webcast scheduled for 29 July 2025.
Bottom Line?
Djerriwarrh’s enhanced dividend yield underscores its income focus, but investors will watch closely how portfolio adjustments and option strategies translate into future capital growth.
Questions in the middle?
- Will Djerriwarrh’s cautious positioning in major banks continue amid evolving market conditions?
- How will the company balance option income generation with the pursuit of capital growth going forward?
- What impact will the deployment of net cash into new investments have on dividend sustainability?
