Why is the AFIC share price outperforming on Monday?

The listed investment company's shares are outperforming today after previewing its full-year results.

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Key points

  • It's been a dreary day for the ASX 200 so far
  • But the AFI share price is outperforming
  • This comes after the LIC reported its preliminary full-year earnings results

It's been a rather dreary start to the trading week for the S&P/ASX 200 Index (ASX: XJO). At the time of writing, the ASX 200 has lost an anaemic 0.05% and is back under 6,800 points. But it's a different story for the Australian Foundation Investment Co Ltd (ASX: AFI), or AFIC, share price today.

The AFIC share price is currently up a more robust 0.62% at $8.13 this Monday after opening at $8.08. This move comes after the listed investment company (LIC) reported its preliminary full-year results for the 2022 financial year this morning.

What did the company report?

  • Net profit of $360.6 million, up 53.4% from the previous year (FY2021)
  • Revenue from operating activities of $393.4 million, up 49.7% from FY2021.
  • Earnings per share (EPS) of 23.3 cents
  • A final and fully franked dividend of 14 cents per share

What else happened in FY2022?

As an LIC, AFIC manages a portfolio of underlying shares on behalf of its investors. Over the financial year just gone, AFIC's net tangible assets (NTA) per share fell from $7.45 per share to $6.63 (before allowing for the final dividend).

However, AFIC has maintained its full-year dividend payments at 24 cents per share, fully franked. That's the same level it funded over FY2021. However, 10 cents out of the 14-cent final dividend will be "sourced from capital gains, on which the Group has paid or will pay tax".

AFIC also reported that the net profit of $360.6 million includes a (non-cash) dividend of $74.9 million that has resulted from the merger of BHP Group Ltd (ASX: BHP)'s petroleum division with the old Woodside Petroleum Limited (WPL). Otherwise, AFIC declared that the large increase in profitability from FY2021 "was driven by higher dividends received from investee companies".

What did management say?

Here's some of what AFIC's management had to say on these results:

Short-term portfolio performance was impacted by adjustments in the market resulting from geopolitical events and rising interest rates which produced a fall in many growth companies trading on high valuations.

These conditions also produced fluctuations in the more cyclical stocks, where AFIC is generally underweight given its long-term investment focus. Portfolio return for the year was negative 6.8%, including franking. The return for the S&P/ASX 200 Accumulation Index, was negative 5.1%, including franking.

What's next?

AFIC is not too optimistic about its own prospects in the immediate future. It declared that "the uncertain environment that produced a fall in equity markets during the financial year is unlikely to be materially different in the short term".

However, it also stated that "in this environment we are comfortable with the current portfolio settings and can afford to be patient with our capital until attractive opportunities present themselves".

AFIC share price snapshot

The AFIC share price has been struggling in recent months. The LIC remains down by 4.59% over the year to date. However, that is not nearly as painful as the ASX 200's 10.5% loss over the same period.

At the current AFIC share price, the Australian Foundation Investment Co has a trailing dividend yield of 2.96%.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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