Last week, some of the Argo team attended the Australian Shareholders’ Association Investor Summit on the Gold Coast. Our Managing Director, Jason Beddow, presented to the audience, and over the two days we spoke with many of the delegates. Below are some of the questions we were asked about Argo, with Jason’s answers.
Why is Argo 
moving to quarterly dividends and did shareholders request this?
Many utilities and other suppliers invoice customers quarterly, so quarterly dividends help shareholders match their income to these regular payments.
The change also brings Argo into line with the many other investment products that now pay quarterly income, which should make us more attractive to prospective shareholders.
A number of shareholders have expressed a strong preference for more frequent dividends, and we wanted to help them with their cashflow needs in the current economy.
Why have you given dividend guidance for 2027?
First and foremost, because we can. We know the companies in our portfolio incredibly well and are confident in our ability to forecast their future earnings and dividends.
We also think providing dividend guidance helps our shareholders because it lets them plan ahead for their spending. Plus, this should make Argo an appealing investment proposition, especially as the dividends represent another record high.
[Argo’s Board announced its intention to pay four dividends of 10 cents per share, fully franked, for FY2027. Read ASX Announcement here]
Does paying dividends quarterly add administrative cost?
There is an extra cost, but with digital technology it’s more cost-effective than in the past.
Quarterly dividends are good for shareholders, but what about for Argo and how you manage the portfolio?
If you look at the income our portfolio receives from its investments, we’re paid in four distinct periods. There are the dividends from companies that pay after the February and August corporate reporting seasons, and then dividends from companies with different financial year-ends.
So, the timing of dividends across the Australian market actually matches our cash flow better than paying out twice a year does. We also think that this cash, as well as franking credits, are better off in shareholders’ hands.
Do you think some of the changes from the May Federal Budget make Argo more attractive?
In theory, yes. At this stage, franking credits don’t look to be much affected. But I think it comes down to the individual.
If you’re investing in AI technology or semiconductors, for example through an ETF, you’re looking for a different kind of return to someone who wants a fully franked dividend like Argo offers. So, I’m not sure the changes will materially change how and where people invest.
That said, if you’re investing in lower-growth companies, a fully franked dividend, or a bigger dividend with franking credits attached, could become more tax-effective. The changes are still being legislated though, so we don’t yet know where it will all land.
Is Argo planning any capital raisings in the short term, like some other LICs have done recently?
No. We wouldn’t raise capital at the current share price discount to NTA (net tangible assets). We do offer Share Purchase Plans from time to time, and we have a regular Dividend Reinvestment Plan. But currently, the DRP doesn’t raise extra capital because we neutralise it by buying the shares on market for the shareholders participating in it.
We have no incentive to grow Argo just for the sake of growing it. That’s different for many other, newer LICs (listed investment companies), which pay an external manager a fee. If a manager charges a 1% management fee and a 20% performance fee, and the LIC raises $200 million, the manager earns an extra $2 million a year in management fees, and possibly millions more in performance fees. That gives an external manager a real incentive to grow the company.
I think that’s fine if the manager is doing a good job for shareholders and investors understand the fee structure when they first invest. Argo is internally managed, so there is no fee paid externally and our focus is simply getting the best outcome for our existing shareholders.