A pair of charitable listed investment companies established by Geoff Wilson have bucked the trend of lower, flat or no dividends and pumped up the interim dividends for income-starved shareholders.
The local and international investment vehicles Future Generation Australia and Future Generation Global will ramp up distributions by 8.3 per cent to 2.6¢ a share and 33.3 per cent to 2¢ a share respectively.
Future Generation Australia and Global CEO Louise Walsh said the board made the decision to increase the payout and bring forward the announcement after careful consideration.
“We’ve got 15,000 shareholders across the two funds. Fifty per cent are SMSFs and retirees in their 50s or 60s; 30 per cent are ultra-high-net-worth and large charities; and 20 per cent are mums and dads. We think the decision will be well received,” Ms Walsh said.
Income-oriented Australian shareholders have had a horror year after traditionally reliable dividend payers, including ANZ, NAB, Transurban, Sydney Airport and Westpac, either slashed or deferred their dividend.
The Future Generation LICs are modelled on a fund-of-fund arrangement but one where the fund manager does not charge a fee and 1 per cent of the assets are donated to support nominated charities each year. Among the fund managers donating their services are David Paradice, Hamish Douglass and Peter Cooper.
Ms Walsh said the dividend policy had been influenced by Future Generation’s founder and director, Geoff Wilson, who insisted the LICs keep enough in reserve to pay out a year’s worth of dividends or more.
“We never wanted to cut or defer a dividend, so it is pleasing news,” Ms Walsh said.
For the year to June 30, Future Generation Australia was down 7.1 per cent compared with the benchmark All Ordinaries Accumulation Index’s 10.4 per cent loss. Since inception, it is up an annualised 7.3 per cent compared with the benchmark 5.5 per cent.
Future Generation Global was up 0.3 per cent over the same period compared with the MSCI AC World Index loss of 4.4 per cent. Since inception, the fund is up an annualised 9.2 per cent compared with the benchmark 8.9 per cent.
“At the end of the day, what we are trying to do is outperform the benchmark and deliver some downside protection,” Ms Walsh said.
Future Generation Australia is on track to donate $4.8 million to youth-at-risk charities, which represents a 4.2 per cent increase on last year, while Future Generation International aims to donate $5.7 million to charities focused on youth mental health, which represents a 16.3 per cent increase.
Ms Walsh quoted data from JB Were that predicts most charities will lose a significant proportion of their revenue, with donations dropping off and fundraising events postponed due to the coronavirus.