HY22: AFIC (ASX:AFI) Share Price Falls Despite Stable Dividend

the Australian Foundation Investment Co. Ltd. (ASX: AFI) (AFIC) The share price is down after the LIC released its FY22 half-year result.

ACEC is one of the oldest and largest publicly traded investment companies (LICs) in the world, paying annual dividends to shareholders.

AFIC HY22 Result

The LIC revealed that operating revenue rose 68.1% to $161.8 million. This excludes capital gains on investments. For shareholders, after-tax profit rose 74.5% to $146 million.

There has been a pick-up in dividend income from several of its major investments. It included larger dividends from: Westpac Banking Corp. (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ), National Australia Bank Ltd (ASX:NAB), Commonwealth Bank of Australia (ASX:ABC), Macquarie Group Ltd. (ASX: MQG), BHP Group Ltd. (ASX:BHP) and Rio Tinto Limited (ASX:RIO).

A number of companies have also reinstated dividends, including James Hardie Industries plc (ASX:JHX) and Ramsay Health Care Limited (ASX: RHC).

One of the main advantages of investing with ACEC is its low operating cost. Its management expense ratio for the period, annualized, was 0.15% without performance fee.

Outperformance

A period of outperformance of late by the ACEC portfolio means it can now show that it has beaten its benchmark – the S&P/ASX 200 Accumulation Index, including postage.

Six month growth in net assets per share of AFIC plus dividends including postage was 6.9%, outperforming the index by 2.3%. Last year saw an AFIC portfolio return of 22.4%, outperforming the index by 3.7%. Over the past decade, the AFIC portfolio’s return of 12.5% ​​has outperformed the index by 0.1% per year.

In other words, it went pretty well. Time will tell if he can continue like this.

AFIC dividend

ACEC’s Board of Directors has decided to declare an interim dividend of $0.10 per share, fully franked. It was the same as last year. It will be paid on February 25, 2022.

It has maintained its ordinary dividend for several years.

Outlook

ACEC noted that the level of economic activity has improved significantly from the pandemic-induced lows of mid-2020, putting interest rate hikes back on the agenda. Although the timing of these increases remains uncertain, US interest rates have already started to rise, which has led to increased volatility in equity markets.

AFIC has indicated that it remains well positioned to buy back its preferred companies if attractive opportunities arise under these conditions.

Is the AFIC share price an opportunity?

The LIC said its underlying net tangible assets (NTA) per share – the underlying value – of the investment portfolio as of December 31, 2021 was $7.76. AFIC’s current stock price of $8.53 is a 10% premium to that number, so it seems pretty relatively pricey at the moment.

It’s a quality LIC, but there are other ASX dividend stocks that could offer stronger long-term income.

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