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Djerriwarrh lifts dividends in 2022/23

Djerriwarrh lifts dividends in 2022/23

Djerriwarrh lifts dividends in 2022/23

In line with our objective of providing shareholders with an enhanced level of fully franked income that is higher than is available from the S&P/ASX 200, Djerriwarrh has increased its final dividend by more than 10 per cent and delivered higher total dividends for the 2022/23 financial year.

Our final dividend for the year ending 30 June 2023 increased 10.7% to 7.75 cents per share, fully franked, from 7.0 cents per share, fully franked, in FY22. The final dividend was also higher than the interim dividend of 7.25 cents per share fully franked.

The increase in the final dividend was mostly due to another strong result from our option activities. We use options strategies to enhance income.

Our total dividends for the year were 15.0 cents per share, resulting in a fully franked dividend yield 1.2 percentage points higher than available from the S&P/ASX 200 Index, and total dividends for 2022/23 were 9.1% higher than the total dividends for the prior year of 13.75 cents per share.

Our full-year profit was $39.1 million, up from $38.0 million last financial year (excluding the non-cash dividend of $6.5 million received last from the BHP Petroleum/Woodside merger). The profit result included income from investments of $35.7 million and income from option activity of $14.8 million. Income from option activity in the prior year was $12.5 million.

The use of options typically reshapes the profile of our returns, producing more immediate income at the expense of potential capital growth. In the context of the strong market over the financial year, Djerriwarrh produced satisfactory capital growth in addition to the enhanced income from the portfolio. The total return, including franking, for the year to 30 June 2023 was 14.2% compared to a 16.6% return, including franking, from the S&P/ASX 200 Accumulation Index.

Our Net Operating Result, which we consider a better measure of Djerriwarrh’s income from its investment activities because it excludes the impact of open option positions, was $39.0 million. The figure for the previous corresponding period was $33.9 million, excluding the merger dividend.

Portfolio adjustments for strong income and growth over long term

Our investment focus continues to be on high-quality companies that can deliver the right amount of income and growth for our portfolio. We also reinvest potential sizeable option exercise proceeds when appropriate.

Our largest purchase over 2022-23 was BHP as we replaced stock that was sold in option exercises and looked to increase our overall position in the company. We also significantly increased our position in National Australia Bank as the stock was available at attractive prices.

Djerriwarrh also made significant purchases in Westpac, Macquarie Group, Commonwealth Bank, Region Group, and Computershare when they presented attractive value and dividend yields. We added two new stocks: Port of Tauranga and Macquarie Technology Group.

We exited our positions in IRESS, Atlas Arteria, Amcor, InvoCare, Brambles, and Sonic Healthcare and also significantly reduced our position in IAG towards the end of the financial year.

Well positioned for dividend income for 2023/24

Our portfolio adjustments have positioned us well for dividend income in 2023/24.

We expect the major banks to largely hold their dividend payments over the next 12 months and the market currently expects another fall in the dividends paid by major resources stocks BHP, Rio Tinto, and Woodside Energy. Even factoring in these expected dividend cuts, we have been able to selectively add to our holdings in these companies at attractive prices and yields.

Retailers such as JB Hi-Fi, Wesfarmers, Coles, and Woolworths usually contribute strongly to our dividend income. The financial health of Australian households will influence their profitability and, despite some concerns about the economy, we expect the strong balance sheets of these retailers to support a reasonable level of dividends.

We’re well placed to generate option income for the first half of the financial year, and we’re well positioned to benefit from any potential capital growth in the market. Our option income potential will continue to be influenced by market volatility and investor sentiment.

We believe our diversified portfolio of quality companies coupled with our actively managed options strategy can produce an attractive level of income and capital growth over the long term in line with our objectives for shareholders.

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