Dividends pressure as AFIC warns on industrial profits

AFIC warned of a tough reporting season, saying the balance of risks is skewed toward declining profits among major industrial companies — a trend that is likely to put dividends under pressure for the industrial part of the market.

Falling profits among industrial stocks can lead companies to cut or hold back dividends, reducing dividend income for investors who rely on payouts from that sector; AFIC noted analysts have been downgrading earnings forecasts outside the resource sector because of a slowing economy and weaker consumer confidence.

AFIC reported a 27% increase in net profit to $233.2 million for the year to June 30, with overall revenue growth also up 27% to $249 million. The main driver was a 30% lift in dividends across the stocks AFIC holds, mainly due to a rebound in bank shares.

Yes — AFIC declared a final dividend to be paid on August 31 and said the full‑year payout was steady on last year, indicating no increase in the company’s overall dividend payout for the year.

AFIC follows a deeply conservative investment strategy with a $4.9 billion portfolio focused on Australian blue‑chip stocks, with a heavy emphasis on banks and large miners — including nearly $600 million worth of shares in BHP Billiton.

AFIC expressed hope that resource‑related stocks will provide more dividends because conditions in the resource sector are described as robust, contrasting with the more challenging outlook for many industrial companies.

The article notes signs of a slowing economy and waning consumer confidence, which have prompted analysts to downgrade earnings forecasts for companies outside the resource sector — a development that can negatively affect dividends and share performance.

AFIC shares closed lower at $4.46 and were trading at a discount to their net tangible asset backing of $4.79, meaning the market price was below the company’s reported per‑share asset value.