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This listed fund manager is beating the ASX market downturn with its special dividends galore

The Bki Investment Co Ltd (ASX: BKI) share price is outperforming the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index after the investment manager posted its interim profit results today.

The BKI share price jumped 1.3% to $1.55 in the last hour of trade when the top 200 stock index lost 0.3% of its value, while other listed investment managers like the Magellan Financial Group Ltd (ASX: MFG) share price and Perpetual Limited (ASX: PPT) share price have slipped into the red.

BKI’s half year results stand out for two distinct reasons. Firstly, it managed to deliver a net operating profit of $25.5 million for the six months to end December 2018, which is 12% higher than in the same period a year ago.

Good performance in tough market

That’s noteworthy as many active fund mangers have suffered double-digit losses due to the sharp downturn in the ASX in the later part of 2018.

Several of BKI’s major investments also came under pressure during the period, and this includes the Commonwealth Bank of Australia (ASX: CBA) share price and AGL Energy Limited (ASX: AGL) share price.

On the flipside, shares like the TPG Telecom Ltd (ASX: TPM) share price and Telstra Corporation Ltd (ASX: TLS) share price probably contributed to its improved results, although share price rises aren’t the only thing driving BKI’s 1HFY19 performance.

This brings me to the second interesting thing about the company’s results. It appears that the capital return deluge also contributed to the good results.

Extra special dividends

BKI said it enjoyed a “significant increase in special dividend income” during the period from the likes of Telstra, Qube Holdings Ltd (ASX: QUB), Suncorp Group Ltd (ASX: SUN) and Woolworths Group Ltd (ASX: WOW).

It also benefited from the BHP Group Ltd (ASX: BHP) off-market share buyback that provided a big franking benefit to shareholders beyond the buyback price.

The receipt of the special dividends has prompted BKI to commit to paying two tranches of special dividends to its shareholders.

Management added that the potential change in government is prompting the payments as Federal Labor is planning on removing the cash refund of excess franking credits if it won office.

The company will pay the same regular fully-franked interim dividend as last year of 3.625 cents per share and will distribute another 1.5 cents per share fully-franked special dividend that’s payable on February 28 this year.

It will then declare another 1 cent per share fully-franked special dividend on or before the release of its full year results, which is scheduled on July 17.

Labor could be in office by then but its unlikely to implement the franking changes so quickly.

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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Commonwealth Bank of Australia, Magellan Financial Group, Telstra Limited, and TPG Telecom Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended TPG Telecom 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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