Why the AFIC share price is rising today

The Australian Foundation Investment Company (AFIC) manages $6.8 billion on behalf of investors.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This morning the Australian Foundation Investment Company (AFIC) reported its financial results for the half-year ending December 31 2018. Below is a summary of the results with comparisons to the prior corresponding half.

  • Half year profit of $239.8 million, up 75.4%
  • 'Investment income' totalled $250.3m, up 69% and supported by participation in Rio Tinto and BHP share buybacks
  • Profit per share came in at 20.1. cents
  • Interim dividend 10 cents per share, flat on last year
  • Special dividend of 8 cents per share declared thanks to cash flows from Rio and BHP buy-back participation
  • NTA per share before any provision for deferred tax on the unrealised gains of $5.69, down from $6.19
  • Six-month portfolio return including franking was -6.4%, versus -6.2% for S&P/ ASX200 Accumulation Index
  • One-year portfolio return including franking was -2.3%, versus -1.4% for S&P/ ASX200 Accumulation Index

By Australian standards the AFIC fund is huge at $6.8 billion which means it has little choice but to own a heavy selection of companies within the S&P/ASX50 index of 50 leading companies or the wider S&P/ ASX200 Index.

This in turn means it is likely to hug the index as its top holdings are likely to broadly align with the largest holdings in the index. The chart below speaks louder than words:

Source: AFIC Investor Presentation.

The fund's primary appeal is its ultra-low cost with a 0.14% management fee and no performance fees.

It will also appeal to tax-effective dividend seekers in the retirement stage, although the Labor party's proposal to abolish certain franking credit cash refunds could hit many of AFIC's rich retiree investors especially.

Four of the fund's top eight holdings are the fully franked dividend-paying banks in Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Australia & New Zealand Banking Group (ASX: ANZ) and Westpac Bank (ASX: WBC), with Australian banks making up 21% of the portfolio.

The AFIC company traded on the ASX then is likely to offer investors returns and dividends similar to the broader S&P/ ASX200 over the years ahead. As such it looks more suitable for retirees after income and stability, than anyone interested in growth.

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Gainers

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why Fortescue, Lynas, PEXA, and Regis Healthcare shares are charging higher

These shares are having a strong session on Thursday. But why?

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Share Gainers

Why Capricorn Metals, Insignia, Perseus Mining, and Qoria shares are storming higher

These shares are having a strong session on Tuesday. But why?

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Amaero, AMP, Block, and South32 shares are racing higher today

These shares are starting the week on a positive note. But why?

Read more »

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another momentous session for ASX shares this Friday.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why BHP, Catalyst Metals, Mesoblast, and Pilbara Minerals shares are shooting higher

These shares are ending the week with a bang. But why?

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

The Mesoblast share price just rocketed 38%! Here's why

ASX investors just sent the Mesoblast share price up 38%. But why?

Read more »