The listed investment companies (LICs) of Future Generation Investment Company Ltd (ASX: FGX) and Future Generation Global Invstmnt Co Ltd (ASX: FGG) have grown their dividends in the June 2020 results.
The Future Generation companies are LICs with two main goals. The first goal is to donate 1% of net assets each year to youth charities and youth mental health charities. They can do this by charging shareholders no management fees. The fund managers that the LICs invests with also don’t charge management fees – they work for free. The other goal is to generate returns for shareholders.
Future Generation Australia HY20 result
Future Generation Australia reported that over the six months to 30 June 2020, its portfolio’s decline of 7.1% outperformed the S&P/ASX All Ordinaries Accumulation Index by 3.3% (the index dropped 10.4%) which included the COVID-19 crash.
Over the past 12 months the LIC’s negative 1.2% return outperformed the index by 6%. Since inception the Future Generation Australia portfolio has grown by an average of 7.3% per annum, outperforming the index by 1.8% per annum. The outperformance was delivered with less volatility.
The board decided to increase its interim dividend by 8.3% to 2.6 cents per share. The LIC had an estimated profit reserve of 8.6 cents per share at 30 June 2020. The LIC was able to fund this dividend announcement thanks to the profit reserve. The Future Generation share price is up almost 3% in reaction to the announcement.
At the current Future Generation Australia share price of $1.05, it offers a fully franked dividend yield of 5% or 7% when grossed-up to include the franking credits.
Some of the charities currently supported include: Act For Kids, Australian Children’s Music Foundation, Australian Indigenous Education Foundation, DEBRA Australia, Diabetes Kids Fund, Giant Steps, Lighthouse Foundation, Mirabel Foundation, Raise Foundation, United Way Australia, Variety and Youth Off The Streets.
This year the LIC will invest $4.8 million into charities, which will bring the total charitable donations since inception to $21.4 million.
At the current Future Generation Australia share price it’s trading at a 8.5% discount to the net tangible assets (NTA) at 30 June 2020.
Future Generation Global HY20 result
Future Generation Global reported that its portfolio’s return of 0.3% outperformed the MSCI AC World Index’s (AUD) return of negative 4.4% by 4.7%. Over the past year the global LIC’s 7.5% portfolio return outperformed the index by 3.6%.
The leadership was pleased to preserve shareholder capital in a highly volatile period.
Since inception, the LIC’s average portfolio return per annum of 9.2% was 0.3% per annum better than the index.
The board of Future Generation Global announced a 33% increase to its dividend to 2 cents per share. This was achieved by tapping into the profit reserve as well as the solid outperformance achieved in recent times.
The Future Generation Global share price is up almost 1% in reaction to the announcement.
If the LIC were to pay 2 cents per share every 12 months going forwards, it would have a grossed-up dividend yield of 2.3% based on the current Future Generation Global share price.
Some of the current youth mental charities currently supported are: Black Dog Institute, Brain and Mind Centre, Butterfly Foundation for Eating Disorders, Kids Helpline, Orygen – the National Centre of Excellence in Youth Mental Health, ReachOut Australia, SANE Australia and Youth Focus.
This year the global LIC will invest $5.7 million, which will bring total donations since inception to $19.7 million.
At the current Future Generation Global share price it’s trading at a 17% discount to the June 2020 NTA.
The share prices of both LICs have risen in reaction this result. Outperformance and an increased dividend have been welcomed in these difficult times and investors clearly thought that both were opportunities after today’s result announcements.
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