MENU

Is Argo Investments Limited (ASX:ARG) the safest share on the ASX?

There are few companies on the ASX that are older than Argo Investments Limited (ASX: ARG). It was established in 1946 and has been investing in Australian shares ever since. Its portfolio is worth around $5.7 billion and has over 84,000 shareholders on its register.

It’s a listed investment company (LIC) that invests in ASX-listed shares and hopes to deliver long-term capital growth and dividend growth for its shareholders.

Argo once had Sir Donald Bradman as its Chairman, which speaks of the investment philosophy and strategy that Argo is following.

Dividend

Argo currently has a grossed-up dividend yield of 5.6% including franking credits, which is quite attractive compared to the income you can get from cash in the bank.

The dividend has been increased or maintained each year since 2010, the dividend was reduced somewhat during the GFC. However, when you take the long-term view the dividend has been increasing over the decades.

Performance and holdings

For me, the relative downside to Argo is the overall performance. It pays a decent dividend each year but it pays out most of its returns each year which leaves little room for capital growth.

Over the past five years its NTA and dividend performance combined was an average of 8.8% per annum compared to the S&P/ASX 200 Accumulation Index which returned an average of 9%. Over the past 10 years Argo’s performance has been 6.3% per annum compared to the index’s 6.4% per annum.

Underperforming the index is perhaps satisfactory if you’re more focused on consistent dividends, which the index won’t necessarily be able to deliver.

The top holdings are quite similar to the index although there are differences. For example Westpac Banking Corp (ASX: WBC) and Macquarie Group Ltd (ASX: MQG) are its two biggest holdings.

Costs

One of the key reasons why the old LICs are so attractive is because they have very low management costs. According to Argo its management fee was 0.15% for FY18, which is very low.

Foolish takeaway

Argo offers investors strong diversification with around 100 holdings, which automatically makes it unlikely to go bust and therefore it is safer. However, I believe there are better LICs for dividends like WAM Research Limited (ASX: WAX) and better LICs for growth like MFF Capital Investments Ltd (ASX: MFF).

More options that could be better for income and growth are these top shares.

3 Top Blue Chips To Buy This Year

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund Ltd and WAM Research Limited. 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 Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.