Is the Argo Investments Limited (ASX: ARG) the best listed investment company (LIC) on the ASX after reporting its FY19 result.
Argo is an Australian listed investment company (LIC) which aims to maximise long term returns to shareholders through a balance of capital and dividend growth. Argo was established in 1946 and now has over 86,000 shareholders and a market capitalisation of $5.7 billion.
Argo’s FY19 Result
Argo has reported that its income from operating activities grew by 31.5% to $315 million and revealed that its net profit after tax (NPAT) increased by 33.7% to $292.7 million.
There were a number of one-offs during the year, such as the Coles Group Limited (ASX: COL) demerger from Wesfarmers Ltd (ASX: WES). If you exclude the Coles demerger ‘dividend’ then Argo’s profit only increased by 17.2% to $256.6 million and profit/earnings per share (EPS) grew by 15% to 36 cents per share.
Argo attributed its strong result for the year to some of the large special dividends that it received from BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Wesfarmers. Argo said its result was also boosted by higher ordinary dividends from Macquarie Group Ltd (ASX: MQG) and Ramsay Health Care Limited (ASX: RHC).
In terms of its performance, Argo said its net tangible assets (NTA) returned 7.3% after costs and tax, whereas the S&P / ASX 200 Accumulation Index returned 11.6% without any allowance for costs or tax.
One of the most important aspects to the old school LICs is their low management fee costs, leaving more of the investment returns in the hands of shareholders, Argo reported that its management expense ratio was steady at 0.15% for the year.
Argo declared a final dividend of 17 cents per share, an increase of 6.3%. This brings the total year dividend up to 33 cents per share, an increase of 4.8%.
Is Argo A Buy?
Argo warned that valuations are at the upper end of historic ranges, earnings growth appears challenged and it has an expectation of downward pressure of corporate earnings.
Under that context, I’m not sure that Argo shares or the ASX index in general is worth pursuing at the moment whilst it’s valued so highly. I think the reliable shares in the free report below could be an even better choice than Argo.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.