Dividends pressure as AFIC warns on industrial profits

AFIC, Australia's largest listed fund manager, said the balance of risks over the next month was more towards declining profits than increasing profits. This assessment added to a generally cautious view of the looming reporting season, which starts next week. Signs of a slowing economy and waning consumer confidence have led analysts to downgrade earnings forecasts for companies outside the resource sector.

"We're not very optimistic for the outlook for dividends in the current reporting season because in the industrial part of the market many of those companies are finding life reasonably challenging," AFIC managing director Ross Barker told BusinessDay.

"We're hopeful we can get more [dividends] from resource-related stocks, where conditions are robust."

Mr Barker made those comments as AFIC reported a 27 per cent increase in net profit to $233.2 million for the year to June 30.

The main factor behind the result was a 30 per cent lift in dividends across the stocks that AFIC holds. This was due mainly to a rebound in bank stocks. Overall revenue growth for the company was up 27 per cent to $249 million.

AFIC itself declared a final dividend of 13? a share to be paid August 31, taking the full-year payout to 21?, steady on last year.

AFIC prides itself on its deeply conservative investment strategy. Its $4.9 billion portfolio reads like a roll-call of Australian blue-chip stocks, with a heavy emphasis on banks and big miners, including nearly $600 million worth of shares in BHP Billiton.

AFIC shares closed 8? lower at $4.46 yesterday, a discount to the $4.79-a-share net tangible asset backing.