The Argo Investments Limited (ASX: ARG) share price is on watch this morning after the company delivered a solid set of numbers for the year ending 30 June 2019.
What were the highlights?
All of Argo's metrics are looking positive. Income from operating activities was up 31.5% to $315.2 million and profit up 33.7% to $292.7 million, while earnings per share was up 15% to 36 cents per share.
After Argo's interim dividend of 16 cents per share (paid in March), Argo reports its final dividend (to be paid on 13 September) will be 17 cents per share. This equates to 33 cents per share for the year – a 4.76% rise from last years' dividend of 31.5 cents per share, and on current prices is equivalent to a 3.99% annualised yield (or 5.7% including franking credits). This is the seventh year in a row Argo has raised its dividend.
Argo explained that the large increases in income and profits were boosted significantly by a "one-off, non-cash income item of $36.1 million" that resulted from the demerger of Coles Group Ltd (ASX: COL) from Wesfarmers Ltd (ASX: WES) that occurred in November 2018. Excluding this 'one-off', Argo's profit was $256.6 million, an increase of 17.2% on the previous full year result.
Argo's dividend income was boosted by a number of special dividends – notably from BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO) and Wesfarmers. Many ASX companies paid out irregularly large dividends prior to the Federal Election in May in anticipation of an expected Labor victory and implementation of franking credit reforms.
Argo's income also benefited from improved ordinary dividends from companies including Macquarie Group Ltd (ASX: MQG) and Ramsay Health Care Limited (ASX: RHC).
Argo's portfolio
For the financial year, Argo added $343 million of 'long-term investments'. Notable additions to Argo's investment portfolio for the financial year include Transurban Group (ASX: TCL), Bega Cheese Ltd (ASX: BGA) and James Hardie Industries (ASX: JHX). Notable sales include Asaleo Care Ltd (ASX: AHY), Coca-Cola Amatil Ltd (ASX: CCL) and Rio Tinto.
Outlook
Argo notes that "valuation ratios of listed companies look to be close to the upper end of historic ranges" and the company is expecting "ongoing downward pressure on corporate earnings", which may lead to increased volatility during the remainder of the year but could also "create buying opportunities to further build our long-term investment portfolio."
