Bki Investment Co Ltd (ASX: BKI) has just released its FY21 half year result, is BKI a reliable ASX dividend share?
BKI is a listed investment company (LIC). Its job is to invest in other ASX shares for shareholders and then it pays them dividends from that investment profit.
HY21 BKI result
BKI announced that its net operating profit after tax for the half ending 31 December 2020 excluding special investment revenue was $14.5 million, a decrease of 41% over the previous corresponding period. Including special investment revenue, like special dividends, net operating profit fell 41.5% to $14.9 million.
The main reason that profit fell so much was that many companies reduced or cancelled their dividends to shareholders because of the COVID-19 impacts. Another small factor was the lower interest rates, causing the bank interest received by BKI to be down by 81% to $0.1 million.
As a result, profit/earnings per share (EPS) before special dividends was down 41.5% to 1.96 cents and including special dividends EPS dropped 42% to 2.02 cents.
BKI explained that the biggest hits to its dividend income came from: Macquarie Group Ltd (ASX: MQG), Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and Transurban Group (ASX: TCL).
APA Group (ASX: APA) was one of the few portfolio positions to increase the distribution for BKI.
In terms of the performance in total shareholder returns (TSR) terms, over six months to December 2020 including franking credits the return was 13.9%. The 12-month TSR to 31 December 2020 was negative 3.2%, which was worse than the S&P/ASX 300 Accumulation Index return of 1.7%.
Its management expense ratio (MER), how much it cost to run the BKI, was 0.16%.
BKI’s underlying value / NTA
BKI said that its net tangible assets (NTA) per share before tax fell by 7.5% to 153.9 cents.
The company said it was the right time to introduce weekly unaudited NTA announcements to the market so that the market stays informed about the underlying value of the LIC.
BKI dividend
The BKI board decided to pay an interim dividend of 2 cents per share, down 45% from last year’s 3.625 cents per share.
Summary thoughts
BKI remains confident about its portfolio for the long term, but the performance has been disappointing for investors in recent times.
The LIC is an interesting idea as an ASX dividend share, but it’s a shame to see such a large dividend cut. It was the right, sustainable thing to do, but investors were probably hoping for a higher dividend.
I think there are other ASX dividend shares with safer dividends like Brickworks Limited (ASX: BKW) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) compared to BKI.
