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HY21 report: Are Argo (ASX:ARG) shares a good long-term investment?

Argo Investments Limited (ASX: ARG) has just reported its FY21 half-year result. Are Argo shares a good long-term buy?

Argo is a listed investment company (LIC). The job of a LIC is to invest in other businesses on behalf of shareholders and generate investment returns.

HY21 report

Argo reported that its profit fell by 43.3% to $67.4 million and profit / earnings per share (EPS) declined by 44% to 9.3 cents.

The LIC explained that in response to the ongoing COVID-19 pandemic, Australian companies generally maintained a cautious approach to declaring dividends. Numerous companies in the portfolio substantially cut or cancelled their dividend payouts, which significantly impacted Argo’s half-year profit.

Argo’s board decided to declare an interim dividend of 14 cents per share, a decrease of 12.5%. The company explained that a key benefit of Argo’s LIC structure is that it has the ability to draw down on reserves of retained earnings and franking credits. This enables Argo to cushion the impact of fluctuations in dividend income through the economic cycle, allowing for a more sustainable dividend flow to shareholders.

Investment performance

Argo said that its investment performance, being its net tangible assets (NTA) return after all costs and tax, was up 12.3% over the six months. Some of the new investments that it made during the period included Aurizon Holdings Ltd (ASX: AZJ) and Newcrest Mining Limited (ASX: NCM). It sold out of its AMP Limited (ASX: AMP) position.

Is Argo a good a long term buy?

In terms of the company’s outlook, it’s optimistic for the year ahead with Australia doing better than many other countries.

Argo said it has a diversified portfolio of quality shares, no debt and a strong balance sheet.

COVID-19 was clearly going to hurt the Argo performance because many businesses have cut dividends so heavily, such as the big four banks, transportation infrastructure and so on.

I think there is a place for LICs like Argo in a retirement portfolio if the focus is almost entirely on income. But it’s better to buy Argo shares at a discount to the NTA – when the share price is lower than the underlying value of the portfolio.

However, there are other ASX dividend shares I think can offer better long term dividend income like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) or Brickworks Limited (ASX: BKW).

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report — or get it emailed to you — for FREE by CLICKING HERE NOW or the button below.

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Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, Jaz owns shares of Washington H. Soul Pattinson and Co.
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