AFIC cautions against larger dividends

Investment company says listed firms should build up capital for growth.

Australian companies should accumulate capital for growth despite growing pressure to pay larger dividends, Australia's biggest listed investment company told The Australian Financial Review.

According to the newspaper, Australian Foundation Investment Company managing director Ross Barker warned firms need to find a balance between capital release and setting funds aside for growth in the future, after listed companies have satisfied shareholders' calls for yield.

"Income is still very important to people - but when companies spend more and more of their profits on dividends, they are not seeing much opportunity to invest in longer term growth," Mr Barker told the AFR.

"You want to invest in companies that also grow."

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