Australian Foundation Investment Co.Ltd. (ASX: AFI) has reported its half year result to 31 December 2018, is it a buy?
Australian Foundation Investment Company (AFIC) is Australia’s largest listed investment company (LIC). It was established in 1928 and invests in Australian shares for its shareholders. AFIC aims to pay a growing stream of fully franked dividends and enhancement of capital invested over the medium to long term.
What AFIC reported
Revenue from operating activities grew by 62.5% to $250.3 million, which was an increase of $96.3 million. This figure excludes the capital gains on investments.
AFIC attributed the improvement to a demerger dividend received as a result of the Coles Group Limited (ASX: COL) demerger from Wesfarmers Ltd (ASX: WES) and participation in the Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP) off-market buy-backs.
Profit after tax attributable to members was $239.4 million, which was up 75.5% on the previous corresponding period.
AFIC has a reputation of maintaining or growing its dividend every year. This year is not different. It has declared a fully franked interim dividend of 10 cents per share, which is the same as last year.
The LIC has also declared a special dividend of 8 cents per share to distribute the proceeds of the participation in the Rio Tinto and BHP off-market buy-backs.
AFIC said that net tangible assets (NTA) before any provision for deferred tax on the unrealised gains on the long-term investment portfolio as at 31 December 2018 were $5.69, down from $6.15, which represents a fall of 7.5%.
Including franking credits, AFIC said that its portfolio underperformed the S&P/ASX 200 Accumulation Index by 0.2% over the past six months and underperformed the index by 0.9% over the past year. AFIC’s performance numbers are after costs.
Is the AFIC share price a buy?
Excluding the special dividend, AFIC appears to offer investors a fully franked dividend yield of 3.9% and is valued at an 8% premium to its reported value per share at the end of December 2018.
AFIC has been a good slow-and-steady investment for shareholders over the decades. But it doesn’t seem to be good value today and isn’t generating strong returns for shareholders. Perhaps the LIC should have kept onto the buy-back money.
If you’re looking for growing dividends and capital growth then three businesses in the free report below could be better picks.
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