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Is the Argo (ASX:ARG) LIC a quality ASX share investment?

Argo Investments Limited (ASX: ARG) is one of the largest and most well-known listed investment companies (LICs). Is it a quality ASX share investment?

WhatĀ isĀ Argo?

Argo is a LIC. The role of a LIC is to invest in other shares and assets on behalf of investors. It’s one the oldest and largest LICs on the ASX – it has been around since 1946 and it listed in 1948.

Its aim is to produce long term returns for investors and provide a balance between capital and dividend growth. Argo looks to invest in a portfolio of ASX shares.

One of the main positives about Argo is that it has a very low cost. The management expense ratio is just 0.15%. That explains the costs of the LIC compared to the total asset value of Argo. It’s one of the cheapest options to get exposure to an ASX share portfolio.

What ASX shares are in the portfolio?

It’s invested in a portfolio of well-known blue chips.

Macquarie Group LtdĀ (ASX: MQG),Ā BHP Group LtdĀ (ASX: BHP),Ā CSL LimitedĀ (ASX: CSL),Ā Commonwealth Bank of AustraliaĀ (ASX: CBA),Ā Wesfarmers LtdĀ (ASX: WES),Ā Rio Tinto LimitedĀ (ASX: RIO),Ā Westpac Banking CorpĀ (ASX: WBC),Ā Australia and New Zealand Banking Group LtdĀ (ASX: ANZ),Ā Telstra Corporation LtdĀ (ASX: TLS) andĀ National Australia Bank LtdĀ (ASX: NAB) are the biggest positions with a weighting of 2.5% or more.

Other notable large investments in the top 20 include Sonic Healthcare LtdĀ (ASX: SHL), Australian United Investment Company Ltd (ASX: AUI) andĀ Reece LtdĀ (ASX: REH). These businesses are not found at the top of the ASX 200 list.

I like that it hasn’t just copied the ASX 200 (ASX: XJO). The top few positions are more focused on quality and growth.

What about the dividends?

Argo says that it has paid dividends every year since it started in 1946.

Its dividend has seen some dividend cuts this century – due to the GFC and COVID-19. But there were only modest reductions, and I think a dividend decline was probably prudent.

Over the last 12 months, Argo has paid an annual dividend of $0.28 per share. That means the current yield at the latest Argo share price equates to a fully franked dividend yield of 3.2%. Not a bad yield in this environment.

Summary thoughts on Argo and the share price

If you want a cheap, income-focused portfolio then Argo could be an interesting LIC ASX share to think about. The Argo share price is currently priced at around the same level as the underlying value per share (the net tangible assets (NTA) per share). So it’s not a bargain or expensive.

It’s not a bad set-and-forget option, but there might be other ASX dividend shares that can create more growth.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.
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