MFF Capital Investments Ltd (ASX: MFF) is one of the few listed investment companies (LICs) to focus on investing in equities overseas. According to Bell Potter, MFF Capital’s pre-tax NTA performance over the past seven years has been an average return of 20.3% per year. I’ve been highly impressed by MFF Capital’s investment choices and performance. Today, the LIC announced its half-year return to 31 December 2017. Here are some of the highlights compared to the prior corresponding period: Net profit after tax (NPAT) up 11.4% to $120.6 million. Pre-tax NTA up 10.4% to $2.477 Post-tax NTA up 9.86%…
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MFF Capital Investments Ltd (ASX: MFF) is one of the few listed investment companies (LICs) to focus on investing in equities overseas.
According to Bell Potter, MFF Capital’s pre-tax NTA performance over the past seven years has been an average return of 20.3% per year.
I’ve been highly impressed by MFF Capital’s investment choices and performance. Today, the LIC announced its half-year return to 31 December 2017. Here are some of the highlights compared to the prior corresponding period:
- Net profit after tax (NPAT) up 11.4% to $120.6 million.
- Pre-tax NTA up 10.4% to $2.477
- Post-tax NTA up 9.86% to $2.083
- Dividend up 50% from 1 cent per share to 1.5 cents per share
Strong global equity markets have helped MFF Capital’s performance over the years, but the investment team have selected shares effectively to outperform the market so significantly.
The strengthening of the Aussie dollar compared to the US dollar didn’t help overall returns, but the rise of the US share market more than made up for it.
The lingering share options have finally been exercised, with 56.1 million MFF options being taken up at $0.9964 each. The options were issued free to shareholders on a 1:3 basis in October 2012.
At the 2017 annual general meeting the chairman advised that the LIC had the intention of increasing the half-yearly dividend to 1.5 cents per share from 1 cent per share due to sales in the portfolio and the franking credits that would be generated.
The MFF directors also confirmed that they intend to increase the half-yearly dividend eventually to 2.5 cents per share. I think this is a fair long-term goal because MFF Capital has generated substantial returns and investors wanted an increase of income.
The current 1.5 cents dividend and future 2.5 cents dividend would balance against the company’s impressive track record of being able to generate strong returns on retained capital. The board would prefer the dividends to be maintained or increased at a sustainable rate, avoiding reductions if possible.
MFF Capital is happy with the returns generated, but is wary of how stretched the market has become. The company said that if the relative underperformance of Australian equity markets and some asset prices continues in future years it may cause Australian opportunities to become relatively more attractive. As of today, MFF Capital didn’t own any Australian shares but that could change in the future.
MFF Capital is currently trading with a grossed-up dividend yield of 1.86% based on two fully franked 1.5 cents dividends and is trading at a 5% premium to the post-tax NTA disclosed at 29 January 2018. I’d be very happy to buy more MFF Capital shares for my portfolio at the current price.
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Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.