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AFIC reports: NPAT up 15.6%

Tristan Harrison
investment manager

Australian Foundation Investment Co. Ltd (ASX: AFI) (AFIC) reported its half-year result to 31 December 2017 today.

The headline figure is that AFIC grew net profit after tax (NPAT) by 15.6% from $118.3 million to $136.6 million. The biggest contribution to this rise was an increase of investment income by $18.5 million. This increase primarily came from a lift of dividends, particularly from resource companies such as Rio Tinto Limited (ASX: RIO).

The interim dividend was maintained at 10 cents per share, which will be fully franked.

AFIC is the largest listed investment company (LIC) in Australia. A listed investment company’s role is to invest the company’s cash into other shares on behalf of shareholders.

It has been doing this investing role since 1928 and has been doing it well.

AFIC is one of the cheapest ways to get exposure to a diversified portfolio. Its annualised management expense came in at 0.11%.

The performance of the portfolio over six months delivered a return of 6.9% and including franking credits it was 7.9%.

The twelve-month portfolio return was 9.9% and including franking credits it was 11.8%.

AFIC said the major contributions to the performance were Rio Tinto, BHP Billiton Limited (ASX: BHP), Wesfarmers Ltd (ASX: WES), Westpac Banking Corp (ASX: WBC), Treasury Wine Estates Ltd (ASX: TWE) and Transurban Group (ASX: TCL).

The LIC disclosed that its four largest share acquisitions were Macquarie Group Ltd (ASX: MQG), Westfield Corp Ltd (ASX: WFD), Transurban and CSL Limited (ASX: CSL).

Its three largest sales were Incitec Pivot Ltd (ASX: IPL), Coca-Cola Amatil Ltd (ASX: CCL) and QBE Insurance Group Ltd (ASX: QBE).

At the end of 2017 its largest five holdings were Commonwealth Bank of Australia (ASX: CBA), Westpac, BHP, Wesfarmers and National Australia Bank Ltd (ASX: NAB).

Foolish takeaway

AFIC remains one of the safest ways to generate a fairly good dividend income on the ASX. It has grown or maintained its dividend over the past 20 years and will hopefully continue to do so for the next two decades. It’s currently trading with a grossed-up dividend yield of 5.38%.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. The Motley Fool Australia has recommended Coca-Cola Amatil Limited, Transurban Group, Treasury Wine Estates Limited, and Westfield. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.