Argo Investments has warned of weak earnings growth in Australia over the coming year as subdued economic conditions force companies to cut costs.
Speaking at the company's annual meeting in Sydney, Argo chief executive Jason Beddow said the sluggish economy had led to a lack of new investment decisions at several industries.
"Against this backdrop, we do not expect strong earnings growth from Australian companies over the coming year and therefore predict only modest dividend growth," he said.
"Particularly with the payout ratio of companies in the S&P/ASX 200 Index approaching the higher end of their historic range, at around 75 per cent."
But he said there would be some growth in dividends where there was modest earnings improvement.
Argo shares closed 2¢ lower at $7.25. Argo's biggest investment for the financial year was a $32.1 million stake in ANZ. It also invested $20.6 million in Wesfarmers and $17.3 million in Westpac.
The group sold its stake in Australian United Investment Company and Diversified United Investment, resulting in $20.1 million and $15.4 million windfalls respectively.
Argo's top 20 investments, including Ramsay Health Care and Twenty-First Century Fox, provide about two-thirds of its income. Banks accounted for 22 per cent of its portfolio, with materials comprising 15 per cent.