BKI lifts dividend target as income outlook improves

BKI Sets Higher FY2027 Dividend Target

BKI Investment Company Limited (ASX:BKI) is carrying a modestly stronger income outlook into FY2027, with the listed investment company proposing total ordinary dividends of 8.00 cents per share, up from 7.95 cents in FY2026. The target is qualified by the absence of unforeseen circumstances and is scheduled to be distributed through quarterly payments.

BKI said it expects approximately $38.0 million of ordinary revenue, excluding special dividend income, in the first half of FY2027. That compares with $35.0 million in the corresponding period of FY2026. The forecast gives shareholders a near-term measure of whether the portfolio's dividend-generating capacity is holding up as the company moves further into its quarterly distribution structure.

FY2026 Profit and Dividends Edged Higher

For the year ended 30 June 2026, ordinary portfolio revenue rose 4% to $67.8 million and total ordinary revenue increased 2% to $70.7 million. The operating result after tax, before special investment revenue, reached $62.8 million, up 3%, while net profit after tax including special investment revenue rose 4% to $64.4 million.

Earnings per share increased to 7.98 cents from 7.67 cents, while the ordinary dividend rose 1% to 7.95 cents per share. That continued the income progression outlined in BKI's January interim dividend increase, although the proposed FY2027 payout remains dependent on portfolio income and other conditions.

Resources Lead September Portfolio

BKI's portfolio had a clear resources and infrastructure tilt at 30 September, with BHP Group its largest holding at 12.3%, followed by APA Group at 7.6%, Commonwealth Bank at 6.4% and Woodside Energy at 5.7%. National Australia Bank, Macquarie Group, Telstra and New Hope Corporation each accounted for between 4.7% and 5.2%, while cash and cash equivalents represented 3.6%.

The positioning extends the resource portfolio rotation reported earlier in the year. BKI's presentation said reporting-season outcomes largely met or exceeded expectations despite elevated funding costs and moderating growth, while also pointing to dividend support from financials, infrastructure and selected consumer businesses. Those are management's observations rather than guarantees of future portfolio performance.

Discount to NTA Remains a Shareholder Tension

At 30 June, BKI reported pre-tax net tangible assets of $2.07 per share against a share price of $1.825, representing an 11.8% discount. The company attributed the recent discount spread to the combination of high cash and bond rates alongside strong equity markets. At the same time, its presentation showed a 6.22% grossed-up historical dividend yield, compared with 3.80% for Vanguard Australian Shares Index ETF and 3.67% for iShares Core S&P/ASX 200 ETF as at the same date.

BKI also reported a one-year total portfolio return of 10.7% and a five-year annualised return of 9.2%, compared with 7.5% and 8.9% respectively for VAS in the presentation's comparison. The figures use different fund structures and methodologies, and past performance is not a reliable indicator of future results. The next test is whether the expected $38.0 million first-half revenue can support the proposed 8.00-cent payout while the NTA discount remains unresolved.