Argo share price lifts on record 2022 financial year profit results

The strong profits were driven by record dividend payouts from some of the LIC's holdings.

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Key points

  • The Argo share price is moving higher in early trade on Monday
  • The listed investment company's FY22 profits leapt 80% from FY21 to a new record high
  • The full year, fully franked dividend is up 18% year on year

The Argo Investments Limited (ASX: ARG) share price is in the green in morning trade, up 0.8%.

Argo shares closed on Friday trading for $9.50 and are currently trading for $9.57.

This comes following this morning's release of the ASX listed investment company's (LIC) results for the financial year ending 30 June (FY22).

Here are the highlights:

Argo share price lifts on record profits

  • Record full-year profit of $312.9 million, up 79.9% year on year
  • Earnings per share (EPS) excluding demerger dividends of 34.3 cents, up 60.3% from FY21
  • Final dividend of 17 cents per share, fully franked, an increase of 21.4% year on year
  • Management expense ratio remained unchanged from the prior year at 0.14%

What else happened during the 2022 financial year?

The company noted that its record profits in FY22 were supported by all-time high dividend incomes it received from a number of stocks in its investment portfolio, with "significantly higher dividends" from S&P/ASX 200 Index (ASX: XJO) mining giants BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO).

The LIC's profits were also boosted by $61.7 million in one-off, non-cash income from the merger of BHP's oil and gas assets with Woodside Energy Group Ltd (ASX: WDS) along with Tabcorp Holdings Ltd's (ASX: TAH) demerger of The Lottery Corporation.

The strong profits boosted the full year, fully franked dividend to 33 cents per share, up 17.9% from the 28 cents per share paid in FY21.

Argo said the year was a volatile one, particularly the second half, with interest rate rises, supply line disruptions, and Russia's invasion of Ukraine. However, through its conservative investment approach, the company said it avoided investing in "many overpriced technology stocks and speculative mining businesses which fell sharply during the year".

According to the release, this saw the Argo share price return 1.6%, outperforming Australian shares by 8.1%.

What's next?

Looking ahead, Argo said the recent rally in ASX shares has been driven by expectations interest rates will top out sooner than previously believed.

The company cautioned, however, that, "Despite the general optimism, current indicators provide conflicting signals for the trajectory of the Australian economy."

On the plus side of the ledger are resilient consumers, companies with strong balance sheets, and record low unemployment. Areas of concern are rising interest rates and the impact on homeowners, continuing disruptions and uncertainties from COVID, and geopolitical unrest.

Argo concluded:

While we expect the Australian and global economies will continue to confront challenges in the immediate term, Argo remains well-positioned with a strong balance sheet, no debt and cash on hand to capitalise on likely market volatility.

We continue to take a long-term share market view and consistently apply our investment approach which has stood the test of time since 1946.

Argo share price snapshot

So far in 2022, the Argo share price is down 6%, compared to a year-to-date loss of 7% posted by the All Ordinaries Index (ASX: XAO).

Longer term, Argo shares have gained 19% over the past five years.

Motley Fool contributor Bernd Struben 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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