Djerriwarrh Investments (DJW) H2 2024 earnings summary

Executive summary

• Net operating result rose 3% to AUD 40.3 million for FY24, with net operating profit per share up 1% to AUD 0.1535 and fully franked dividends per share up 2% to AUD 0.1525, reflecting a focus on enhanced, fully-franked income above the ASX 200 at low cost.

• Portfolio dividend yield, including franking, was 6.5% on NTA and 7.4% on share price, both well above the index yield of 4.7%.

• Option income grew 12% to AUD 16.6 million, supporting the enhanced yield strategy.

• Share price trades at a substantial discount to NTA (AUD 2.95 vs. AUD 3.36) as of 30 June 2024.

• Management rights are internally held, resulting in a low management expense ratio (MER) of 0.42%.

Financial highlights

• Dividend and distribution income increased 2% to AUD 36.3 million year-over-year.

• Option income yield reached 2%, the highest in five years.

• Portfolio total return for FY24 was 13.6%, closely tracking the benchmark's 13.5%.

• Net profit after tax was AUD 39.0 million, slightly down from AUD 39.1 million in FY23.

• Franking credit reserves exceed AUD 0.20 per share, supporting future dividend sustainability.

Outlook and guidance

• Portfolio positioned with a net cash ratio of 4%, providing flexibility to reinvest in high-yielding stocks as opportunities arise.

• Market viewed as moderately expensive, with S&P/ASX 200 near all-time highs; cautious approach with selective reinvestment and active options management.

• Entering FY25 with high call option coverage on outperforming stocks and recent purchases in high-yield stocks to offset lower bank dividends.

• Confident in long-term strategy to deliver enhanced yield and capital growth through a diversified, high-quality portfolio.