Early Listed Managed Investments results provide positive outlook for dividends

The month of July was busy for Listed Managed Investments with a number of LIC & LITs announcing increased dividends & distributions, the release of FY23 results and some corporate actions taking place. The attached report takes a look at the key news flow for the month, including the key takeaways from the LICs & LITs that reported their results during the month. A summary of the key news flow includes:   

• D2O Raise Capital to Fund Acquisition of Water Entitlements: During July, Duxton Water Limited (ASX: D2O) announced they had entered into a purchase and leaseback agreement for Australian water entitlements with Treasury Wine Estates Limited (ASX: TWE). D2O will acquire 4,770 megalitres of water entitlements for cash consideration of $39.1 million. The acquisition comprises 2,799 megalitres of High Security entitlements and 1,971 megalitres of High Reliability permanent water entitlements in NSW and VIC. As part of the transaction, D2O has negotiated a long term leaseback with TWE for 3,816 megalitres. The acquisition will increase D2O’s water entitlements portfolio by 6% and increase the Company’s annualised leasing revenue by $1.4 million per annum from 1 July 2023. The acquisition is to be funded by an Institutional Placement and a Non-Renounceable Entitlement Offer to eligible shareholders. The Company has completed the Institutional Placement raising $7.25 million (before costs) through the issue of 4.83 million new shares at $1.50 per share. The offer price represented a 10.1% discount to the share price on the date prior to the announcement being made and a 27.2% and 16.7% discount to the pre-tax and post-tax NTA, respectively, as at 30 June 2023. The Non-Renounceable Entitlement Offer seeks to raise up to $44.2 million (before costs) through the issue of shares on a 1-for-4 basis at $1.50 per share. The Offer was scheduled to close on 1 August 2023.
• FPC Opt Out of Buy-Back: On 13 July 2023, Fat Prophets Global Contrarian Fund Limited (ASX: FPC) announced that the Company will not proceed with the next tranche of the Equal Access Buy-Back which was scheduled to commence on 1 October 2023.
• LSX Invests $1m in Alto Metals: On 24 July 2023, Lion Selection Group Limited (ASX: LSX) announced they had agreed to invest $1 million in Alto Metals (ASX: AME). Alto is progressing the Sandstone Gold Project in WA, Australia. The Manager believes “Alto is strongly exposed to the positive thematics of gold price, gold project growth and potential development, and gold project consolidation.” The Company’s gold exposure now includes Alto and Great Boulder Resources (ASX: GBR).
• Morphic Ethical Equities Fund (ASX: MEC) Announces Changes to Dividend Policy: On 4 July 2023, the Company announced a change to the dividend policy, with the Board intending to declare dividends, in total, equivalent to the value of the Company’s current total Profit Reserve before the expiry of the initial term of the Investment Management Agreement (IMA), which is due to expire in May 2027, unless extended. The Company has advised the size of the quarterly dividend is expected to be calculated based on dividing the outstanding Profit Reserve as the end of each quarter by the number of remaining quarters before the expiry of the IMA. At 30 June 2023, the Company had a Profit Reserve in excess of 45 cents per share. The Company intends to pay quarterly dividends for the September quarter 2023 and the following 14 quarters until the end of the initial term of the IMA of 3 cents per share. This dividend amount may increase in the event of further accruals to the Profit Reserve. The Company has sufficient franking credits to fully frank three more quarterly dividends at 3 cents per share, without the generation of any new franking credits. The Board will consider how to apply accrued franking credits at the time it declares a dividend.
• PL8 Maintains Monthly Dividend for September Quarter: Plato Maximiser Fund Limited (ASX: PL8) announced that it will be maintaining the monthly dividend of 0.55 cents per share for the September 2023 quarter. Dr. Don Hamson commented “Rising interest rates and inflation have increased uncertainty but we still expect to receive solid dividends from a diversified portfolio of Australian companies. One of the benefits of a closed-end listed investment company focused on income, such as PL8, is the ability to manage capital amidst uncertainty so as to provide regular dividend distributions over time.”
• WAR Declares Final Dividend: During the month, WAM Strategic Limited (ASX: WAR) declared a final dividend for FY23 of 2 cents per share, fully franked. This takes the full year dividend to 3.5 cents per share, a 16.7% increase on the full year dividend declared for the FY22 period. The Company also announced it’s intention to increase the full year dividend to 4 cents per share, fully franked, for the FY24 period (interim and final dividend of 2 cents per share), subject to no material adverse changes in market conditions or the investment portfolio. The guidance comes on the back of the growth in the Profits Reserve, with the Company having a Profits Reserve of 8.9 cents per share as at 30 June 2023, before the payment of the final dividend for FY23. After the payment of the final FY23 dividend, this represents dividend coverage of 1.5 years based on a 4 cents per share dividend before any further accruals to the Profits Reserve.
• SEC Announces Quarterly Dividend of 2.8 Cents Per Share: Spheria Emerging Companies Limited (ASX: SEC) announced a dividend of 2.8 cents per share, fully franked, for the quarter ended 30 June 2023. The increase comes after the announcement in May to pay dividends on a quarterly basis that represent 1.25% of the post-tax NTA at the end of each quarter, subject to available profits, cash flow and franking credits. This was an increase from the previous dividend policy of 1% of the post-tax NTA.