Why I like BKI Investment Co. Ltd for its 7% yield 

BKI Investment Co. Ltd (ASX: BKI) recently announced to the market it is looking to raise up to $202 million from existing and new shareholders, to expand its investment portfolio. 

The funds will be raised via the following: 

Entitlement Offer – Up to $62 million, via a pro-rata offer of 1 new share for every 15 shares held by existing shareholders. 

General Offer – up to $140 million, available to both existing and new shareholders.  There is no maximum on the amount of shares you can apply for under this General Offer. 

The offer is priced at $1.50 per share.  This represents a 4.5% discount to the NTA as at 30 April, and a gross dividend yield of 7%. 

New shares will also qualify for the final dividend, usually paid at the end of August. 

Essentially this offer is open to everyone who is interested in buying shares in BKI Investment Co. Ltd. 

Shareholders will receive details in the mail. For those who are not shareholders and are interested in the offer, more information can be found through BKI’s website, or Advanced Share registry. 

As for whether shares in BKI make a good investment, let’s have a look… 

The company was listed on the ASX in 2003.  Today, it owns a diversified portfolio of 46 stocks worth around $1 billion. 

It’s managed by Contact Asset Management who have family ties to, and are partly owned by, the hugely successful investment conglomerate Washington H. Soul Pattinson & Co. Ltd (ASX: SOL). 

The portfolio is also run at low cost, with a management expense ratio of 0.17%. 

Many of the stocks in the portfolio are large-cap dividend payers.  Stocks like the big four banks, Wesfarmers Ltd (ASX: WES) and Woolworths Group (ASX: WOW). 

Over the last 14 years, the company has produced a shareholder return of 10.8% per annum, including franking credits. This compares to the S&P/ASX300 Accumulation Index return of 10.4% per annum, including franking. 

Foolish takeaway 

Investing in BKI is a simple way to own a large portfolio of dividend-paying stocks providing fully franked dividends.   

In my view, the discount and the strong yield makes for a decent buying opportunity for income focused investors.

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Motley Fool contributor David Gow owns shares in BKI Investments Company. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited and Wesfarmers Limited. 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 Scott Phillips.

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