Australian Foundation Investment Co.Ltd (ASX: AFI) is the ASX's largest listed investment company (LIC) boasting a market capitalisation of $6.5 billion.
It's size, long operating history and sound track record have attracted a loyal following of shareholders which currently number around 108,000. Given the closed-end structure of an LIC, this large shareholder base is a benefit as it increases the stock's liquidity.
Australian Foundation (AFIC) has a primary investment goal to pay dividends which, over time, grow faster than the rate of inflation. It's a goal which many self-managed super fund investors are also trying to achieve.
As at June 30 the five largest positions in AFIC's portfolio were:
- Commonwealth Bank of Australia (ASX: CBA)
- Westpac Banking Corp (ASX: WBC)
- BHP Billiton Limited (ASX: BHP)
- National Australia Bank Ltd. (ASX: NAB)
- Telstra Corporation Ltd (ASX: TLS)
Tallied up these five stocks account for 35% of the total portfolio (excluding cash) so the dividends received from these five companies are certainly important to AFIC shareholders.
Based on data supplied by Morningstar the above five stocks are trading on historic dividend yields of between 5.6% and 7% each. Importantly, each company is forecast to either maintain or grow its dividend in the following two financial year.
In financial year 2015, AFIC paid a total dividend 23 cents per share which was up one cent on the prior year. With the shares currently trading at $5.95 this implies a fully franked dividend yield of 3.9%. The high allocation to the big four banks in AFIC's portfolio means dividends for investors will be heavily influenced by the factors affecting the banks. Something to bear in mind when selecting any LIC or managed fund.
