AUI’s Dividend Stability Tested Amid Market Volatility and Rising Interest Rates

Financial Performance Overview

Australian United Investment Company Limited (AUI) has released its audited results for the financial year ended 30 June 2025, revealing a steady financial performance amid a volatile market backdrop. The company reported a statutory profit after tax of $49.9 million, marking a 1.5% increase from the prior year. Earnings per share rose 3.1% to 40.2 cents, reflecting improved operational efficiency and portfolio management.

Revenue from ordinary activities dipped slightly by 1.3% to $57.3 million, influenced in part by lower special dividends received during the year. Excluding these special dividends, revenue and profit after tax showed modest growth of 0.8% and 3.5% respectively, underscoring the resilience of the company’s core investment income.

Net Tangible Asset Backing and Dividend Policy

AUI’s Pre-tax Net Tangible Asset (NTA) backing per share increased significantly to $12.98, up from $11.74 in the previous year. This 14.7% uplift outpaced the S&P/ASX 200 Accumulation Index’s 13.8% gain, highlighting the company’s effective portfolio strategy and asset selection. The company’s diversified holdings, including major positions in Commonwealth Bank, Wesfarmers, and BHP, contributed to this outperformance.

The Board declared a fully franked total dividend of 28 cents per share, consistent with the prior year’s payout. This comprises an ordinary final dividend of 20 cents and a special dividend of 8 cents, the latter sourced from retained earnings accumulated from prior special dividends. With a franking credit balance sufficient to support this dividend level for the next four years, AUI continues its long-standing commitment to reliable, fully franked shareholder returns.

Balance Sheet and Borrowings

Significant progress was made in reducing the company’s borrowings, with drawn debt falling to $25 million from $77 million a year earlier. This reduction lowered finance costs substantially, with interest expense coverage improving to 22.8 times profit before interest and tax, compared to 11.1 times previously. The company maintains access to $145 million in secured borrowing facilities, providing financial flexibility amid uncertain market conditions.

Portfolio Activity and Market Outlook

During the year, AUI’s portfolio turnover was modest at 8%, with notable acquisitions including Santos, APA Group, and Origin Energy, while positions in Woodside and Commonwealth Bank were partially or fully reduced. The company’s investment approach remains focused on long-term capital appreciation and income generation within an acceptable risk profile.

Looking ahead, the Directors note a shift in the economic environment characterized by historically higher interest rates, reduced globalisation, and potential valuation contractions. They anticipate steady ordinary dividends with a payout ratio near 100%, alongside the continuation of the special dividend. The outlook suggests a greater emphasis on value, defensive stocks, yield, and gold, reflecting a cautious stance amid ongoing market uncertainties.