Listed investment company Argo Investments has made a number of changes to its portfolio over the past year, as it seeks to maintain its profile as a source of sustainable and growing dividends.
According to Argo’s 2018/19 financial report, it added fleet management and leasing company Eclipx Group, James Hardie Industries, Star Entertainment Group and Viva Energy to its portfolio.
The $6 billion fund increased its holdings in Bega Cheese, Boral, Oil Search and Transurban.
Argo returned 7.3 per cent over the 12 months to June 30, compared with a return of 11.6 per cent for the S&P/ASX 200 Accumulation Index.
Its dividend yield over the past year was 3.8 per cent, fully franked. Dividends payouts have increased steadily year-on-year since 2010.
Argo managing director Jason Beddow says: “Argo’s performance reflects the composition of its long-term portfolio, which tends to be weighted to mature companies with reliable cashflows and higher dividend payout ratios, rather than high growth stocks.
“This reflects our primary objective of providing sustainably growing dividends to Argo shareholders over the long term.”
Argo sold out of personal hygiene product manufacturer Asaleo Care, Coca-Cola Amatil, education provider Navitas and Twenty-First Century Fox.
It reduced its holdings in BHP Group, Incitec Pivot, Milton Corp and Rio Tinto.
The top holdings in the portfolio are Westpac, Macquarie Group, BHP, ANZ, CSL, Commonwealth Bank, Rio Tinto, Wesfarmers, NAB and Telstra.
Beddow says: “In our view, there is likely to be ongoing pressure on corporate earnings. Given this subdued outlook, Argo’s investment team is focused on identifying companies with strong cashflows and dividend histories, as well as solid long-term prospects, that will provide profit and dividend growth into the next phase of the economic cycle.
“With cash available, Argo is well positioned going into this corporate profit reporting season. As high expectations are built into many companies’ share prices, we expect there will be volatility following some results announcements, which could create buying opportunities to further build our long-term investment portfolio.”