Why Is Pengana Raising Dividends Amid a Profit Slump and Strategic Review?

Half-Year Financial Performance

Pengana International Equities Limited (ASX, PIA) has released its financial results for the half year ending 31 December 2025, revealing a net profit after tax of $4.6 million. This represents a significant decline from the $26.9 million recorded in the same period last year, a downturn largely attributed to weaker global equity markets. The company’s Total Portfolio Return (TPR) was 1.6%, markedly below the MSCI World Total Return Index (AUD) benchmark of 8.7% over the same period.

Despite the subdued portfolio performance, Pengana’s Total Shareholder Return (TSR), which factors in dividends and share price movements, was a respectable 10.2%, rising to 10.9% when including the value of franking credits. This suggests that income returns and dividend policy have helped cushion shareholders against the softer capital gains.

Dividend Policy and Capital Management

Reflecting confidence in its income generation and profit reserves, Pengana announced an increased fully franked quarterly dividend of 1.4 cents per share, payable on 16 March 2026. This annualised dividend of 5.6 cents per share equates to a grossed-up yield of approximately 6%, a notable income stream for investors seeking reliable returns in a volatile market environment.

The company maintains a strong financial position, with $355.2 million invested in global listed equities and $7.4 million in cash. Profit and franking reserves remain robust, supporting the sustainability of fully franked dividends into the foreseeable future, assuming current tax rates persist.

Strategic Review and Board Changes

In response to persistent shareholder feedback and a narrowing but still present share price discount to net tangible assets (NTA), the board initiated a strategic review of Pengana’s structure and operations in October 2025. An Independent Board Committee, chaired by Brett Jollie, has been appointed to assess various proposals aimed at enhancing shareholder value. The review is ongoing, with an update expected by the end of February 2026.

Coinciding with this strategic pivot, the company announced the retirement of Independent Chair Frank Gooch, effective immediately. Brett Jollie, who has led the strategic review committee, will assume the chairmanship, signalling a new leadership phase focused on delivering improved outcomes for shareholders.

Investment Outlook and Portfolio Positioning

Pengana’s investment manager, Harding Loevner, highlighted the evolving global equity landscape, noting a shift away from US market dominance and the concentration of returns in a handful of AI-exposed technology giants. The portfolio’s broader diversification, with overweight positions in companies like Alphabet, ASML, and Amphenol, contrasts with underweight exposure to mega-cap US stocks such as Apple, Tesla, and Nvidia, which impacted relative performance.

The portfolio strategy remains focused on high-quality businesses with durable competitive advantages, strong balance sheets, and resilient earnings. The investment team is balancing participation in the ongoing AI capital expenditure cycle with caution against overvalued segments, aiming to capture upside while managing risk amid policy uncertainties and market volatility.