Pengana International Equities Eyes 56% Dividend Boost with Private Credit Pivot
Pengana International Equities reported a solid $33.8 million profit for FY2025 and unveiled a strategic plan to diversify into global private credit, aiming to increase dividends by over half and shift to monthly payments.
- Net profit after tax of $33.8 million, EPS 13.13 cents
- Final fully franked dividend of 1.35 cents per share declared
- Proposal to invest in leveraged global private credit portfolio
- Targeting 56% dividend increase and monthly dividend payments
- Ongoing share buyback to offset dilution from dividend reinvestment plan
Strong Financial Performance Amid Market Volatility
Pengana International Equities Limited (ASX, PIA) closed the 2025 financial year with a net profit after tax of $33.8 million, translating to earnings per share of 13.13 cents. The company maintained its steady dividend policy, declaring a final fully franked dividend of 1.35 cents per share payable in September 2025, continuing its tradition of quarterly fully franked dividends.
Net tangible assets rose to $352.8 million, reflecting a resilient portfolio of global equities managed by Harding Loevner LP. Despite modest underperformance against the MSCI World Total Return Index, the portfolio benefited from strong stock selection in sectors like Communication Services and Consumer Discretionary, while avoiding energy sector exposure.
Strategic Shift, Diversifying Into Global Private Credit
In a significant strategic announcement, Pengana revealed a proposal to diversify its asset base by investing in a leveraged global private credit portfolio. This move aims to create a steady, less volatile income stream independent of equity market fluctuations. The private credit portfolio will be managed by Pengana Capital Group Limited (PCG) with institutional expertise from Mercer, a global leader in private credit investment consulting.
The funding for this new strategy will come from a competitive loan secured against the existing equity portfolio. Notably, PCG has committed to covering any shortfall if the private credit returns fail to meet the cost of debt, sharing upside returns above a 4.5% target return over debt costs.
Dividend Growth and Monthly Payments on the Horizon
With the anticipated reliable income from private credit, Pengana plans a substantial 56% uplift in fully franked dividends, increasing from 5.4 cents to 8.4 cents per share annually. This translates to an attractive gross yield of approximately 8.9% based on recent share prices and net asset values.
In addition, the company intends to transition from quarterly to monthly dividend payments starting mid-November 2025, enhancing cash flow regularity for shareholders. This combination of diversification and enhanced distributions positions Pengana uniquely among Australian listed investment companies.
Capital Management and Governance
Pengana continues its disciplined capital management, with an ongoing on-market share buyback program designed to offset dilution from shares issued under the Dividend Reinvestment Plan (DRP). In FY2025, all DRP shares issued were repurchased, maintaining shareholder value.
The Board also approved a 5% increase in directors’ fees effective 1 July 2025, reflecting governance responsibilities and market standards. The financial statements were audited by Ernst & Young, who issued an unqualified opinion, underscoring the company’s sound financial controls and reporting.
Looking Ahead
Shareholder approval for the private credit investment proposal will be sought at the upcoming Annual General Meeting in October 2025. If approved, Pengana’s dual exposure to global equities and private credit, combined with monthly fully franked dividends, could redefine its market positioning and appeal to income-focused investors.
Bottom Line?
Pengana’s pivot to private credit and monthly dividends could reshape its income profile, but execution risks remain ahead of shareholder approval.
Questions in the middle?
- Will shareholders approve the leveraged private credit investment at the October AGM?
- How will the new private credit strategy impact Pengana’s risk and return profile long term?
- What are the implications of the 25% franking rate on future dividend sustainability?