AFIC declares special dividend and retains strong franking position
Quick Read:
Full year profit of $293.5 million, up 3.0% on the prior year
A fully franked final dividend of 14.5 cents per share and a fully franked special dividend of 2.5 cents per share was declared, taking total fully franked dividends for FY26 to 31.5 cents per share
AFIC retains a strong franking position with an update regarding future capital management initiatives to be made at the AGM in October 2026
Portfolio return was 0.9% including franking credits, compared with 7.2% for the S&P/ASX 200 Accumulation Index, including franking
AFIC continued to invest in quality long-term opportunities while buying back AFIC shares at a discount to net tangible asset backing
For the year ended 30 June 2026, AFIC delivered a full year profit of $293.5 million, up from $285.0 million in the previous corresponding period. The increase was driven by higher dividends and distributions received from the portfolio together with increased gains from the trading portfolio.
AFIC's investment portfolio stood at approximately $9.8 billion at year end, while the management expense ratio declined to 0.14%, reflecting the Company's continued focus on low-cost investing for our shareholders.
The Board declared a fully franked final dividend of 14.5 cents per share and a fully franked special dividend of 2.5 cents per share, maintaining total fully franked dividends at 31.5 cents per share for FY26.
The special dividend reflects the strong balance of franking credits generated through realised capital gains in recent years. AFIC’s balance of franking credits remains robust, even after accounting for the payment of special dividends in FY25 and FY26.
AFIC Portfolio Manager Brett McNeill said "providing shareholders with stable to growing ordinary dividends remains one of AFIC's key objectives. While earnings will fluctuate from year to year, our focus is on building a portfolio of quality companies that can deliver income and capital growth over the long term."
"We've built a strong franking position over a number of years through the generation of realised capital gains. The Board believes those franking credits are best distributed to shareholders in a timely manner, which is why we've again declared a special dividend this year. Importantly, our franking position remains strong and we'll continue to consider further capital management initiatives as opportunities arise."
Market and Sector Performance
AFIC's portfolio returned 0.9% including the benefit of franking credits for the year, compared with 7.2% for the S&P/ASX 200 Accumulation Index on the same basis.
The Australian share market was characterised by a significant divergence in sector returns during FY26. The Materials sector was a key driver of market performance, with BHP and Rio Tinto each delivering total returns of approximately 68% during the year, alongside strong gains from gold, lithium and rare earth producers.
AFIC's relative underperformance was largely attributable to its lower exposure to these areas of the market. Performance was also affected by weakness in the Healthcare and Information Technology sectors.
Other holdings performed strongly, including Woolworths Group, ALS, Macquarie Group and Coles Group. While market conditions proved challenging during the year, AFIC believes the portfolio remains well positioned to meet its long-term investment objectives.
Portfolio Activity
Sigma Healthcare was the largest addition to the portfolio during the year. Following its merger with Chemist Warehouse, AFIC believes the company is well positioned to benefit from long-term growth in healthcare and pharmacy retailing, supported by a strong market position and attractive industry fundamentals.
One of AFIC's most significant investments during the year was in its own shares. With AFIC trading at a material discount to net tangible asset backing for much of the period, the Company saw compelling value in undertaking share buybacks to enhance value for remaining shareholders.
Periods of market weakness provided opportunities to build positions in a number of preferred long-term holdings at more attractive valuations. AFIC also established new positions in Pro Medicus, TechnologyOne, Life360, Temple & Webster, HUB24, Objective Corporation and Pinnacle Investment Management.
On the sell side, AFIC exited Sonic Healthcare, WiseTech Global, Worley, IDP Education and Telix Pharmaceuticals, while reducing holdings in a number of companies where valuations were considered elevated.
International portfolio
During the year, AFIC refined its approach to international investing, reducing the number of holdings from 44 companies to 19. These changes concentrated the portfolio in companies that meet AFIC’s criteria for quality, while providing exposure to sectors that aren’t widely represented in the Australian market
The international portfolio stood at $148.7 million as at 30 June 2026, compared with the initial investment of $103.5 million made in 2021. Today, the portfolio represents approximately 1.5% of AFIC's total portfolio..
At year-end, the portfolio's largest holdings included Schneider Electric, Amazon, Visa, Eli Lilly, Ferguson Enterprises, Waters and Netflix.
Looking ahead
"Another year of positive returns from equity markets has been notable given the geopolitical events and inflationary pressures experienced over the period. The resilience of both the Australian economy and share market has exceeded many investors' expectations,” Brett said.
"However, market valuations remain above long-term averages and forecast dividend yields are below historical levels. In that environment, we believe it is important to remain disciplined and focused on quality companies capable of delivering sustainable income and growth over the long term."
We look forward to meeting with investors and stakeholders at the upcoming Annual General Meeting on 1 October 2026.