A: Australian Foundation (AFI), which is Australia’s biggest listed investment company and possibly the oldest, has been an underperformer in recent times. For the year to July, their return (including franking) was 7.6% compared to the index return of 13.0%. Over 3 years, it is 11.6% pa compared to the index of 13.8% pa. Over longer periods, it is better – 10 years is 9.2% pa compared to the index of 10.1% pa.

 

But they have also been smashed on the sharemarket. The discount to NTA (net tangible asset value) has blown out to a record level. On 15 August, this stood at 11.9% (NTA of $8.43, ASX price of $7.43).

 

In regard to dividend yield, they are largely paying the market. Current dividend is 31.5c, prospective yield on a $7.39 share price is 4.2% (fully franked).

 

For a broad based market investment such as an ETF, you won’t find materially higher yields. If you want a higher yield, you will need to buy individual stocks, which involves a whole different risk paradigm.

 

I wouldn’t be a seller of AFI when they are trading at such a big discount.