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Argo share price on watch after solid full-year results

Sebastian Bowen
eye, look, see

The Argo Investments Limited (ASX: ARG) share price is on watch this morning after the company delivered a solid set of numbers for the year ending 30 June 2019.

What were the highlights?

All of Argo’s metrics are looking positive. Income from operating activities was up 31.5% to $315.2 million and profit up 33.7% to $292.7 million, while earnings per share was up 15% to 36 cents per share.

After Argo’s interim dividend of 16 cents per share (paid in March), Argo reports its final dividend (to be paid on 13 September) will be 17 cents per share. This equates to 33 cents per share for the year – a 4.76% rise from last years’ dividend of 31.5 cents per share, and on current prices is equivalent to a 3.99% annualised yield (or 5.7% including franking credits). This is the seventh year in a row Argo has raised its dividend.

Argo explained that the large increases in income and profits were boosted significantly by a “one-off, non-cash income item of $36.1 million” that resulted from the demerger of Coles Group Ltd (ASX: COL) from Wesfarmers Ltd (ASX: WES) that occurred in November 2018. Excluding this ‘one-off’, Argo’s profit was $256.6 million, an increase of 17.2% on the previous full year result.  

Argo’s dividend income was boosted by a number of special dividends – notably from BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO) and Wesfarmers. Many ASX companies paid out irregularly large dividends prior to the Federal Election in May in anticipation of an expected Labor victory and implementation of franking credit reforms.

 Argo’s income also benefited from improved ordinary dividends from companies including Macquarie Group Ltd (ASX: MQG) and Ramsay Health Care Limited (ASX: RHC).

Argo’s portfolio

For the financial year, Argo added $343 million of ‘long-term investments’. Notable additions to Argo’s investment portfolio for the financial year include Transurban Group (ASX: TCL), Bega Cheese Ltd (ASX: BGA) and James Hardie Industries (ASX: JHX). Notable sales include Asaleo Care Ltd (ASX: AHY), Coca-Cola Amatil Ltd (ASX: CCL) and Rio Tinto.

Outlook

Argo notes that “valuation ratios of listed companies look to be close to the upper end of historic ranges” and the company is expecting “ongoing downward pressure on corporate earnings”, which may lead to increased volatility during the remainder of the year but could also “create buying opportunities to further build our long-term investment portfolio.”

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited, Transurban Group, and Wesfarmers Limited. The Motley Fool Australia has recommended Coca-Cola Amatil Limited and Ramsay Health Care Limited. 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 Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019