Djerriwarrh FY dividend drops as profit slumps 25.5%

Djerriwarrh, the yield-driven listed investment part of the Australian Foundation Investment Co stable, has been forced to slash its final dividend.

Djerriwarrh reported full-year net operating profit down 25.5 per cent from fiscal 2019. Picture: Damian Shaw

Djerriwarrh, the yield-driven listed investment part of the Australian Foundation Investment Co stable, has been forced to slash its final dividend in the wake of the unprecedented volatility on the sharemarket while it sold down key blue-chips as its call options were exercised.

Djerriwarrh reported full-year net operating profit - the key component of its dividend - was $28.1 million, down 25.5 per cent from fiscal 2019.

Net operating result per share was 12.54 cents, down from 16.95 cents per share, while net profit was weaker by 4.1 per cent to $32.9m.

Revenue from its operating activities, drawn from investing in Australian equities as well as writing call and put options to help supplement its income, was down 28.2 per cent in 2020 to $28.6m.

Djerriwarrh has always prided itself on its ability to produce strong dividend returns for its shareholders, many of which are retirees, but the wild swings in share prices since the coronavirus pandemic emerged this year has dented its ability to generate income.

The listed investor has declared a final dividend of 5.25 cents per share, down from 10 cents for the same time last year, payable on August 28. This brings total dividends for the year to 14 cents per share, down from 20 cents per share in 2019.

Djerriwarrh said under normal circumstances the final dividend would be close to the net operating result for the half of 4.9 cents per share, but the board considering the difficult conditions brought about by COVID-19 have also decided to use a small amount of reserves to bring the final dividend to 5.25 cents.

The investor said major sales for the 12 months period were mostly as a result of the exercise of call options, including its positions in CSL, Wesfarmers, Commonwealth Bank and National Australia Bank.

There was also a reduction in its holding of James Hardie and positions exited in the year included AUB Group, Ansell, Worley and Treasury Wine Estates.