Solaris Australian Equity Income Plus posts inaugural profit, beats benchmark, declares first fully franked dividends

Maiden profit and benchmark outperformance

Solaris Australian Equity Income Plus Limited (ASX:SET) has marked its debut financial period with a net profit after tax of $727,000, surpassing its benchmark since listing on the ASX in April 2026. The company’s actively managed Australian equities portfolio delivered a flat total return of 0.0%, outperforming the S&P/ASX 200 Franking Credit Adjusted Daily Total Return Index (Tax-Exempt) which fell 1.01% over the same period. Income generation also edged ahead, with the portfolio yielding 0.72% compared to the benchmark’s 0.65%.

The company raised $188.4 million through its initial public offering (IPO), issuing over 94 million shares at $2.00 each. Since listing, SET’s share price has traded at a premium to its net tangible asset (NTA) backing, with a 7.3% premium recorded at 30 June 2026, contributing to a total shareholder return (TSR) of +6.5% for the period.

Dividend strategy kicks off with fully franked payouts

In line with its objective to provide regular income, Solaris has declared its first three fully franked monthly dividends: 0.3 cents per share payable on 31 August, 0.5 cents on 30 September, and 0.7 cents on 30 October 2026. The October dividend run rate implies a gross yield of approximately 6% per annum, including franking credits, based on the IPO price.

The dividend policy is underpinned by the company’s profits reserve and franking account balance, both sufficient to support these initial payments. The Board’s approach balances consistent income delivery with prudence around available profits, cash flow, and franking credits.

Investment approach blends income and growth with tactical opportunities

Solaris Investment Management Limited, the appointed manager, applies a fundamental, style-agnostic strategy focusing on both income and capital growth. The portfolio typically holds 40 to 70 Australian listed securities, selected through proprietary research to optimise dividend income and identify tactical income opportunities such as special dividends and capital management initiatives.

Key contributors to relative outperformance included overweight positions in Life360 (+49.1%) and Zip Co (+83.1%), and an underweight position in Commonwealth Bank (-10.1%). Detractors included overweight exposure to Woodside Petroleum (-17.4%) and underweights in Wesfarmers (+19.5%) and Rio Tinto (+0.3%). The portfolio’s blend of higher yielding value stocks and lower yielding growth companies reflects the manager’s flexible approach.

The manager remains cautious on some high-profile banking stocks, notably Commonwealth Bank, amid potential impacts from federal budget changes to negative gearing and credit growth. The portfolio also avoided companies considered potential “dividend traps,” such as Lendlease, which is expected to cut dividends in August.

Navigating a dynamic market environment

Market volatility driven by geopolitical tensions, the Australian federal budget, commodity price fluctuations, rising interest rates, and expanding artificial intelligence investments is shaping company earnings and dividend policies. Solaris is capitalising on this environment by increasing exposure to quality companies whose shares have sold off due to uncertainty, especially regarding AI disruptions.

Special dividends remain a focal point, with successful positioning ahead of announcements from Qube Holdings and A2 Milk, expected to bolster income and franking in July. The manager anticipates further dividend opportunities arising from growing franking balances across the ASX in upcoming full-year results.

Governance, risks, and outlook

SET’s board, chaired by Neil Cochrane, comprises experienced directors with deep investment and governance expertise. The company operates under a robust risk management framework addressing equity market risk, dividend sustainability, liquidity, regulatory changes, and operational risks.

While the net tangible asset backing per share dipped slightly from $2.00 at inception to $1.985 at 30 June 2026, this was partly offset by unrealised tax benefits, with post-tax NTA at $1.998 per share. The premium to NTA and positive TSR suggest investor confidence in the company’s strategy and dividend prospects.

Looking ahead, Solaris Australian Equity Income Plus aims to sustain its income and total return objectives, leveraging its active management and tactical income opportunities to navigate evolving market conditions.