One of the highest-performing listed investment companies (LIC) on the ASX is MFF Capital Investments Ltd (ASX: MFF). It focuses on international shares, mainly listed in the US. Today, it has reported its annual result for the year to 30 June 2018. For most companies, the headline figure is the net profit after tax (NPAT). For MFF Capital, this figure was $239.9 million, which was mainly driven by the LIC’s net assets increasing by $285 million due to positive market price movements and also the options. NTA gains For LIC investors a key statistic to note is the net…
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One of the highest-performing listed investment companies (LIC) on the ASX is MFF Capital Investments Ltd (ASX: MFF). It focuses on international shares, mainly listed in the US.
Today, it has reported its annual result for the year to 30 June 2018.
For most companies, the headline figure is the net profit after tax (NPAT). For MFF Capital, this figure was $239.9 million, which was mainly driven by the LIC’s net assets increasing by $285 million due to positive market price movements and also the options.
For LIC investors a key statistic to note is the net tangible assets (NTA) per share movement. This represents how much underlying value there is for each share. MFF Capital’s pre-tax NTA was $2.324 at 30 June 2017 and rose to $2.762 at June 2018 – an impressive rise of 18.8% during the year, which doesn’t account for dividends paid.
Speaking of the dividends, MFF Capital announced a dividend increase of 50% from 1 cent per share to 1.5 cents per share for the final dividend.
The Board said that they note, continue to respect, and have responded to, the desire of some shareholders for higher dividends. But, they also noted that the retained money is put to good use with strong medium-term returns.
It doesn’t make sense to sell holdings, pay tax and then invest in similar or inferior investments. However, MFF is also making more sales now than when prices were low.
MFF Capital has a long-term goal of increasing the half-yearly dividend to 2.5 cents per share.
Other notable things
MFF Capital benefited during the year by having a lower interest expense and somewhat lower quarterly research and services fees.
At the end of June 2018 MFF Capital had an approximately zero net cash or debt position and the major positions were largely unchanged during the year.
Its top holdings at June 2018 were Visa, MasterCard, Home Depot, Lowe’s, Bank of America, JP Morgan Chase, Alphabet (Google), HCA Healthcare, Wells Fargo and Facebook.
Chris Mackay wrote “market expectations (and hence market prices) are again higher than 12 months ago. Higher market prices equate to lower future returns, higher capital risk, lower margins of safety and mean that benefits from deferred tax liabilities are relatively lower than when market prices were lower.
“In aggregate, ‘vision’ and poorer quality companies are staying in business longer and continuing to attract mathematically challenged [venture] capital and politicians, usually spending other people’s money.”
He said that MFF Capital will continue to take the medium-to-long-term approach.
In my opinion MFF Capital ticks almost every box for what an investor could want out of a LIC investment. It may not have a big dividend yield, but it is earning excellent returns on the retained money.
I plan to increase my MFF Capital in the near future and into the long-term because I think it’s one of the best ways to get exposure to internationally-listed shares.
Another business that I think is really exciting is this ASX share that’s starting to expand into Asia.
It's been a nail-biter of a reporting season here in the first half of 2018.
But the real action, in my opinion, is what companies are doing with dividends.
What does this mean for you? Well there is one stock I've found that could very well turn out to be THE best buy of 2018. And while there's no such thing as a 'sure thing' when it comes to investing - this ripper might come as close as I've ever seen.
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 Scott Phillips.