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Key points
- The LIC AFIC has said it aims to grow the dividend over time faster than inflation. Will this help the AFIC share price?
- AFIC's portfolio has been outperforming the ASX 200 recently
- Its profit and cashflow are benefiting from the strengthening of dividends from the ASX's blue chips
Since the start of the calendar year, the Australian Foundation Investment Co. Ltd. (ASX: AFI) (AFIC) share price has risen 2%, outperforming the S&P/ASX 200 Index (ASX: XJO) by approximately 10%.
The old listed investment company (LIC) has a few different goals for the business. One of the key aims of the business is to provide a consistent stream of dividends for shareholders.
HY22 result
AFIC was one of the first ASX shares to report its result for the six months to December 2021.
In terms of its own investment income, AFIC said that for the six months to 31 December, it was $159.4 million, an increase from $93.8 million last year. The LIC attributed this strong dividend recovery to a few different blue chips: the major banks, Macquarie Group Ltd (ASX: MQG), BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG). A number of companies also re-instated their dividends during the half-year.
AFIC has reported that its investment returns have been outperforming in the shorter-term. The six-month portfolio return including franking was 6.9%, compared with the S&P/ASX 200 Inx return of 4.6%.
It was a similar story of outperformance over the past 12 months where AFIC's portfolio return including franking was 22.4% and the index's accumulation index over the year including franking was 18.7%.
AFIC's dividend intentions
AFIC has said that its investment focus is on a diversified portfolio of Australian equities.
Its primary objectives are to pay dividends which, over time, will grow at a faster rate than inflation, and to generate attractive total returns in terms of growth in net asset backing plus dividends.
It declared an HY22 interim dividend of $0.10 per share. That means the overall trailing grossed-up dividend yield is 4%.
Outlook for the AFIC share price and profit
When delivering its FY22 half-year report, the LIC said:
Our strategy of owning a diversified portfolio of quality companies that are well placed to deliver earnings growth over the medium to long term remains appropriate. While market volatility may emerge, short term periods of uncertainty often present good buying opportunities for investors focused on a company's long-term prospects. The portfolio is soundly positioned despite the spectre of rising interest rates and heightened global uncertainty.
Some recent investments for the portfolio includes JB Hi-Fi Limited (ASX: JBH), WiseTech Global Ltd (ASX: WTC), Coles Group Ltd (ASX: COL), Transurban Group (ASX: TCL), BHP Group Ltd (ASX: BHP) and CSL Limited (ASX:CSL).
AFIC share price snapshot
Over the last year, the AFIC share price has climbed around 15%.
