Well, good afternoon, everyone. I'm Mark Freeman, the CEO and Managing Director of the Australian Foundation Investment Company. Joining with me on the call today, I have David Grace, a Portfolio Manager from the investment team, Andrew Porter, our CFO, Matthew Rowe, our Company Secretary, and Geoff Driver, General Manager of business development. AFIC announced its interim results to 31st of December 2020 this morning. We wanted to give shareholders an update on these results and the portfolio performance and positioning. Before we start the presentation, a bit of housekeeping on the teleconference. This briefing is based on the material available on the company's website. If you are using your computer to access the presentation via the webcast, the slides will change automatically. If you are accessing by phone only, the PDF of the slides with page numbers is available on the website.
Finally, please note, following the presentation, there'll be time for questions and answers. You can ask a question either via the webcast or through the operator. If you would like to ask a question through the webcast, you can do it via the Ask a Question tab at the top right of the webcast window. If we don't get to all the questions in this presentation, we will seek to respond via email as we did for the full-year result. We will now run through the presentation. On slide two, there's our usual disclaimer just stating that we're here to talk about the company. We don't give financial advice, and we don't have a license to do that. Moving on to slide three. Just a bit of background on the company. AFIC invests in Australian and New Zealand companies, seeking out quality investments for the long term.
We're the largest listed investment company on the ASX at around AUD 8 billion. We're also listed on the New Zealand Stock Exchange with around 160,000 shareholders in total. We're a transparent company through being a listed company ourselves with an independent board of directors providing strong governance. Importantly, the shareholders own the management rights to the portfolio and company. There is no external funds management business deriving an income from the portfolio. You can see on the next line, the management expense ratio or the cost of running the company is 0.10%, which is an annualized figure with no performance fees. We're a long-term investor with low portfolio turnover. Tax has less of a negative impact on shareholder returns compared with high turnover funds. We have a long history of growing or stable fully franked dividends.
The investment team manages three other funds, being Djerriwarrh Investments, Mirrabooka, and AMCIL, which adds significantly to the effectiveness of the investment process and idea generation. Moving on to slide four, the investment objectives. The company aims to provide shareholders with attractive investment returns through accessing a growing stream of fully franked dividends and growing our capital invested. Our primary investment goals are to pay dividends, which over time grow faster than the rate of inflation. That's taking a long-term view and provide attractive total returns over the medium to longer term. At this point, I'll pass over to Andrew Porter, our CFO, to give the highlights of the recent results.
Thank you, Mark. Good afternoon, everybody. The slide that, if you can see it, is talking about the interim results summary. It'll probably come as no surprise to anybody that the profit was down to AUD 84 million, down about 42%, bearing in mind the reduction in the dividends that we received. Just a reminder, our profit is derived, of course, from the dividends that we receive from companies that we invest in, a small amount of trading, less the expenses of running the business. Just to put it in summary, there were companies or businesses such as Sydney Airport, of course, which didn't pay a dividend at all this half. The banks were down about 60% in terms of the dividends that they paid.
Bit different in terms of something like ANZ, for instance, that actually paid its interim dividend this half, not having paid it the previous half. Even some of the bigger miners, the BHPs, the Rios, their dividend contribution to AFIC was down about 30%. This all contributed to the profit being down, as I said, about 42%. Not everything was down. We actually had an increased dividend from Wesfarmers because it paid out a special as a result of its sale of the Coles stake, so that helped. I'm happy to go obviously into any more detail if shareholders want following the main presentation. Perhaps of great concern to shareholders or great interest to shareholders, I should say, we maintained the interim dividend at AUD 0.10, despite the earnings per share, obviously in the current context being less than that.
As has been mentioned before, we have reserves, and we're able to draw on those reserves to ensure that dividend was maintained. The dividend itself will be paid on the 23rd of February. Shareholder return, that's the share price plus dividends, 22.5%. That has been manifested in the premium to NTA increasing. The management expense ratio, 0.10%. That's about the same as it was this time last year. We'll come onto the portfolio returns, which is a measurement of how the portfolio plus dividends with an adjustment for franking credits works, and we'll come onto more detail on that later on. Total portfolio AUD 8.1 billion as Mark has said. Obviously the incremental increases in a rising market sees that continuing to grow. I'll hand over now to David Grace, who's the AFIC portfolio manager.
Thank you, Andrew, and good afternoon, everyone. Moving on to slide six. Slide six and slide seven outline the attributes we look for in the companies we invest into. We are focused on investing in quality companies that can grow their earnings over the long term. We're interested in companies offering a sustainable competitive advantage, as it is this advantage that will sustain earnings growth over the long-term investment horizon. We want our companies to be run by strong management teams and boards, and we prefer companies with recurring predictable earnings. Financial strength is critical. We want companies generating sufficient free cash flow to be able to, one, service debt from occurring sources. Two, invest in appropriate growth options for future earnings growth. Three, be able to maintain a growing dividend profile. On to slide seven.
For early stage companies, where we recognize they are developing our preferred attributes, we aim to make an early stage investment or nursery stocks as we define them. While initially only small, the growth potential in these businesses is large. Importantly, and consistent with our long-term investment approach, we only look to buy where we perceive the share price represents good long-term value. Moving on to slide eight, which shows market performance over the last 12 months. Market volatility was extreme as investors grappled with the risk that COVID-19 posed to company earnings and balance sheets. At its most extreme, the market fell 35% between mid-February and mid-March. During times like these, selling tends to become indiscriminate. We became active buyers during the period, pleasingly having the opportunity to buy several high-quality companies at attractive prices.
From late March, investment markets became increasingly comfortable that the worst of any COVID-19 impact on company balance sheets was behind us. Focus shifted from the real concern over whether a company had available liquidity to fund itself to the less severe concern over what the earnings impact from COVID-19 was likely to be. Government stimulus measures and supportive monetary policy settings played a large part in boosting investor confidence. The rally in the market over the last nine months of 2020 was a tale of two halves. Initially, quality companies were bought as investors were attracted to what in many cases was a cheap entry price into high-quality businesses, where long-term growth prospects remained strong and largely unchanged. More recently, confidence around government stimulus measures has been supported by increasingly positive news around the development and distribution of a vaccine.
Cyclical stocks or those companies more dependent on the external environment to deliver earnings growth were bought by the market. Companies operating the retail, travel, and building products markets, together with the banking sector rallied sharply. Resource companies have also been a large beneficiary in recent months, with improving global growth forecasts leading to increased demand for resources. Iron ore has been particularly strong, supported by stimulus measures in China and production issues with a large producer, which reduced global supply. Having spent several years building up holdings in quality companies, portfolio turnover has reduced in recent months. Our quality focus has been a driver of portfolio performance over the course of 2020, and we remain comfortable with the holdings in the portfolio. Economically, the world remains a highly uncertain place, and it's impossible to predict with any confidence what will drive the share market in the near term.
Despite the short-term uncertainty, quality companies with good prospects remain well-placed to deliver attractive returns to shareholders over the long term. On the right-hand side of the slide, we show the incredible growth in the technology sector as many of these companies saw demand for their services increase as a result of COVID-19. The chart also shows the rally late in the year in both the resources sector, the green line, and banks, the red line. Moving on to slide nine. 2020 was an extremely challenging year in equity markets. Volatility was high, and there were large swings in monthly returns as investor confidence around the COVID-19 situation changed frequently. The performance of the portfolio over the last 12 months has been pleasing, returning a positive 5.8% versus the benchmark ASX 200 return of 2.4%.
Over the last six months, the market recovered sharply, with the portfolio returning 15.2% against the benchmark return of 13.7%. Moving on to slide 10, which outlines the largest winners, losers, and missed opportunities over the last six months. Companies on the left-hand side delivered the greatest share price gains for the portfolio. All five are run by very strong management teams and boards, all have a unique asset base in relation to their markets, and all have strong long-term growth prospects. We are attracted to companies displaying the owner-driver culture, where the founder of the business remains heavily invested. With all five of these companies, the founder either remains on the board or still managing the business. The biggest drag on portfolio performance came from those companies shown in the center of the slide.
Transaction-based revenues have been lower for the ASX, and when combined with the technology issues that led to a temporary pause in the market operation, the share price underperformed the market. We remain comfortable in the strong market position of the ASX, the strong balance sheet and management team, and accordingly have used the price weakness to increase our holding. Origin and IAG have faced a particularly challenging external environment. FINEOS, a recent addition to the portfolio, has declined from our initial entry price. FINEOS is an early-stage global software company providing core software to the life, accident, and health insurance industry. The company's prospects remain strong, and we rate the management team highly. The right-hand side of the slide shows two companies that have performed incredibly well over the last 12 months, neither of which we own, and accordingly have been a drag on our performance.
Afterpay has been a strong performer, rising more than 300% in 2020, significantly outperforming our expectations. The business was early to the buy now, pay later sector and has consolidated the first-mover advantage by rapid growth in customers in Australia initially, and more recently in the U.S. and U.K. markets. The product resonates strongly with consumers, and retailers view the platform as a productive way to attract new customers. While many of our questions around the business model have been answered, our remaining concern centers around the longevity of the company's competitive advantage. High price stocks trade with the embedded assumption that their competitive advantage and earnings growth can be sustained over the long term. Afterpay has many competitors, and we continue to assess the ability to maintain a strong customer proposition over the long term. Fortescue is a pure play Australian iron ore producer.
It has benefited from the near doubling of the iron ore price in 2020. The business has been extremely well run under CEO Elizabeth Gaines, consistently growing iron ore production while lowering production costs. The net effect is a higher return per ton of iron ore produced and a generation of significant free cash flow. While the portfolio has benefited from investments in diversified miners Rio Tinto and BHP, both have underperformed the share price performance of Fortescue. While we missed the opportunity last year, we feel comfortable at this point in the cycle that the majority of gains are likely to have been made. Moving on to slide 11. The largest purchases over the last six months were increasing our holdings in Woolworths, CSL, and ASX, together with our participation in the Sydney Airport capital raising.
Share price weakness provided the opportunity to increase our holdings at prices not reflecting strong long-term prospects. All these companies are market leaders, have a unique asset base, and are run by strong management teams. While travel demand has been interrupted in the short term, we regard Sydney Airport as a fantastic asset for the long-term investor. While we can't predict when travel will return, we feel the capital raising has improved the company's balance sheet, so the business is better positioned to deal with the current disruption. While corporate travel may not fully return, ultimately, the vast majority will resume traveling, particularly in the leisure space. The sharp market sell-off in February and March provided the opportunity to invest meaningful capital into a number of high-quality companies at attractive valuations. Cochlear is the market leader in the development and manufacture of cochlear implants.
Revenue growth for the business has long been constrained by the available hours that audiologists have to meet with implant recipients. During COVID, Cochlear accelerated the rollout of its online patient interface, allowing audiologists to hold consultations remotely. While still early, results to date have shown that 90% of patient interactions can achieve a satisfactory outcome online, freeing up audiologists' time to see more patients. This positions the business well to deliver meaningful growth in the future. Goodman Group is the largest global developer of distribution centers. Goodman Group has a portfolio of assets positioned to capture the rapidly growing demand for online shopping. The business maintains a strong balance sheet and is well managed, with the CEO and founder, Greg Goodman, maintaining a significant portion of his personal wealth invested in the business.
REA Group or realestate.com.au is the largest online real estate classifieds business in Australia, with a market share more than two times its nearest competitor. REA generates significant free cash flow and is consistently investing in new product development. Additionally, during the half, we established positions in two earlier-stage companies. Being FINEOS, a leading global software company providing core software to the life, accident, and health insurance industry. The company offers a cloud-based solution and has a significant growth opportunity. Secondly, Nanosonics, a leading manufacturer to the healthcare industry of high-level ultrasound disinfection products. Nanosonics has developed a leadership position in the U.S. market and has potential to increase penetration as it broadens its product offering. During the period, we exited our holdings in South32 and Eagers Automotive with our view that the long-term prospects for both companies are likely to be increasingly challenging. Moving on to slide 12.
Slide 12 to 14 outline the top 30 holdings in the portfolio as it stands today. Collectively, the top 30 represents over 80% of portfolio value. While I've discussed a number of these companies already, I wanted to provide a couple of comments on how the portfolio is positioned in a few topical sectors. Around 8% of the portfolio is currently invested in technology stocks. I earlier mentioned the recent purchase of FINEOS. Additional holdings in the sector include realestate.com.au, SEEK, carsales.com, NEXTDC, Xero, Iress, Netwealth and Altium. While the capital invested in the banks has declined in recent years, our holdings remain meaningful. Despite the challenges of the current environment, our exposure to banks will continue to contribute to portfolio income over the long term, particularly as dividends increase with payout ratio restrictions being lifted.
In resources, our largest holdings are BHP and Rio Tinto, both low-cost producers maintaining strong balance sheets, paying high dividends and benefiting from continued strong customer demand for commodities. In summary, we feel the core of the portfolio is invested in quality companies holding strong industry positions, where long-term prospects remain attractive. I'll now hand over to Mark for comments on the outlook on Slide 15.
Thanks, David. Slide 15. With the onset of COVID-19, we expect interest rates to stay low for the immediate future. Low interest rates plus government stimulus has provided meaningful support to equity markets globally. The full impact of the economic conditions on company earnings and dividends we feel are still to play out. It's uncertain how a vaccine is going to impact economies and markets more generally. We feel we are in strong companies to see through that period. Some areas of the market, it is difficult to reconcile the valuations, simplistically the PEs we're seeing, particularly in some areas of the tech sector and healthcare. We do acknowledge and we do hold some of these companies, that the earnings growth potential is more significant for those companies. Overall, we believe the portfolio is well-positioned, holding quality companies, given the adjustments we've made during March and April.
There's obviously a new administration or a new administration is about to take place in the U.S., which could create some volatility. Obviously, interactions with China could also lead to further volatility. However, we remain patient investors. Further volatility will simply provide us more opportunities to add to the quality companies in the portfolio. With that, we'll pass it back to Geoff to take some questions.
Yeah. I'll facilitate the questions and answers session. What we'll first do is run through some of the questions we've got through the webinar, and then we'll proceed to telephone and then hopefully, come back to webinar if there's any future questions. Sorry, any other questions then, I should say. I'll go in the order we've received them. The first question is: How are the overseas investments progressed? Might just remind shareholders what we spoke about at the AGM.
Okay, thanks, Geoff. What we indicated at the AGM is that we, for a while, have been working on an internal project, looking at applying the AFIC way of investing to international stocks. We've taken on some resources to help us with that, and our preliminary work suggests that it would be very effective in terms of establishing our portfolio. We've been running a model portfolio for some time. We're very pleased with the performance of that, we took the next step of looking to increase the resources that are available in terms of staff to that project, the AFIC board agreed to commit between 1% and 1.5% of the portfolio into that portfolio of roughly 50 stocks. We haven't invested that money as yet. We do have approval.
We've been still obviously finalizing our structures and processes, and we're still finalizing our portfolios, we want to invest in, and obviously, looking at the current market conditions. We're hopeful in the foreseeable or the short-term future, we'll start to invest that money and obviously, we'll update shareholders along the way. Just to reiterate, in total it's going to be a very small part of the AFIC portfolio. I guess the comfort for shareholders is that portfolio international stocks, they are outstanding companies and at the very least, we think will add to the quality of the overall AFIC portfolio. I think the other thing to point out is that, just the learnings from looking at and researching overseas companies, it certainly helped myself in thinking about investments and the quality of companies in our Australian market.
Another important factor is that I think it's going to improve us all as fund managers, the more we look at overseas businesses. I think it's a very positive step forward to the group.
Thanks, Mark. Another question we've got here is about nursery stocks and what's our typical holding in nursery stocks in percentage terms of the portfolio. I guess the interesting part about that, some of those nursery stocks actually become large stocks over a relatively short period of time. It's not an exact definition. Have you got a thought there about?
Yeah, sure. Thanks, Geoff. Currently, approximately 3% of the portfolio would be invested in nursery stocks. The largest of those is Xero, which has been a strong performer over the last 12 months. That's the largest out of the total 3% there.
Yeah. The line does get blurred about.
What is nursery and if you look back five or six, seven years ago, Mainfreight was one we took in.
Link Group and some.
Yeah. It's really a way that we sort of get comfort in finding companies that, as we pointed out, that may not be quite hitting all our quality filters as yet, but seem to be on the pathway. It's really a tool for us to take that small investment, start to follow the company closer, get more interaction with management, and then look to build a position as we get comfort with that.
Probably as an adjunct to that question is, are you looking to increase positioning in high tech internet companies?
Yeah. Well, that's a very general question. If we get the opportunity, the answer would be yes. Some of the valuations are very high at this point, but certainly, I think all the stocks that we like in that space, if we had the opportunity, we'd be happy to add all of them if we saw an opportunity.
Okay. Another question we've got is, do we participate in the DRP, say, in the top 10 portfolio positions? You might talk about our approach to DRPs in terms of how we look at those.
Sure. Yeah. Typically, we elect to take the cash option. Depending on the plan that's being offered, but the typical course is that we take cash and then we look to reinvest that into opportunities as we see as best for the portfolio.
Okay. Thanks, David. Are we thinking about raising any additional funds?
Well, there's been no discussion on that at this point, so nothing to report there. Obviously we have the DRP in play still, so people have the ability to reinvest and grow their holding through that. As I say, it's something that constantly gets talked about at the board level. It's certainly not off the table.
Yeah. A question here on China and iron ore risk impacting BHP and Rio in the short to medium term. What do you see the risks around that particularly?
Obviously BHP and Rio are in the portfolio because if you look at the market structure of those businesses, they've got the best quality and lowest cost iron ore in the market. That sort of market analysis has led to them performing really well when the price goes up. I guess from here, though, it certainly gets harder. Certainly my expectation is that they reward shareholders with better dividends in this period. That's really been the strategy they've laid out, so we're hopeful that will occur. It does get harder from here to see the profit growth continue. Certainly the iron ore price is incredibly high, and I think it's way above where certainly even the companies themselves ever expected. I'm not sure certain events would certainly trigger that to come off.
One would be is if Brazil was able to get back to better supply or if China slowed down their construction markets. I'm not sure, David, it feels a little bit more at the top to us at the moment.
Yeah, I think the drivers of that have been the perfect storm where you've had demand remaining strong and there was that supply disruption from a large producer towards the end of calendar year 2020. Really at the moment, we see supply coming back online at some point this year. Demand indicators at this point in time all remain strong, certainly hard to repeat the performance of what we've seen over the last 12 months.
Just another question about sectors, I guess is oil and gas sector in particular, Santos and Woodside. What's the current view around those?
We don't own Santos at the moment. I think it's a very well-managed business actually. We've been holding Woodside and Oil Search and a smaller holding in Origin. Obviously, it's been a very challenging period for the sector with the oil price having come off. There's been a reasonable recovery in the oil price back to around AUD 55, AUD 56. We're starting to see a decent bounce in those companies. I guess the challenge for us long term is really the ability for those companies to actually get back to making a decent return on capital and the challenges around how they grow those businesses going forward. Certainly as a longer term investor, we acknowledge that there's going to be perhaps pressure on that industry.
We're doing quite a bit of work on that at the moment, so perhaps we'll have more to say on that when we do the next update. It is an industry that does have its challenges in terms of the returns they make and the longer-term outlook for the whole oil and gas industry. It's something we're spending a fair bit of time on.
You might just mention how much that industry presents in our portfolio because it's actually very small, isn't it, at the moment?
Yeah, sure. Those three combined holdings that Mark mentioned is around about 2.7% of the portfolio. Just to be clear, their exposure really is through LNG as opposed to oil. LNG, as it stands at the moment, will be a transition fuel until we get scale or economic scale of a renewable energy source. We are watching that as to what the long-term return profile looks like. At this stage, there is further momentum in the LNG space in the short term.
Andrew, I'll throw this one to you. It's a question we invariably get asked every time we pay a dividend, particularly in this environment. Can you give us an idea in terms of current profit reserve and what we have in terms of that relative to our current dividend position?
The profit reserves in the latest set of figures would equate to about AUD 0.80 per share. That's not, however, the franking credit that is payable per share. The two are different. What we said in the last annual report, shareholders will recall, is that after the payment of the final dividend last year, we had about AUD 0.26 worth of franked dividend that was payable. Those are what I would call the reserves that we can pay out of. Obviously, we earned roughly AUD 0.07 and we paid out AUD 0.10, that balance is shrinking. Going forward, of course, it will depend upon what the outlook is, what the dividend growth is that we start getting in. The directors will take all of that into consideration when looking at final dividends.
You can't be in a position where to paraphrase Scott Morrison, you're continually paying out more than you're earning. One of the benefits that we've said of an LIC as opposed to an ETF or trust, is that we can have reserves and we do have reserves, and we can use those reserves to smooth out the dividend in times like this.
Just on that, Andrew, there's a couple other sort of questions around that. A few years ago, people have got very good memories here, we did suggest that we actually try and give parity between interim full-year dividend. Is that still a medium-term sort of policy objective, do you think?
I think that would depend upon what your view of medium term is. At the moment, the most important thing would be trying to maintain the dividend. To achieve parity while maintaining the dividend would mean cutting the final dividend and increasing the interim dividend, I don't think anybody's keen to do that. Yes, it hasn't gone away as an objective, the timeline will probably take a bit longer than what is originally envisaged.
Yeah. I suppose another question here in terms of dividends, while we're on that theme, is around if we did invest in more international companies, what does that mean for the income profile of the portfolio?
Yeah, sure. You take that international portfolio as a group, it'd be sort of like a stock position of 1%-1.5%. I think the yield on that would be around probably 1%, so it's lower than the market, but the businesses we'd be going into would have much higher earnings growth prospects, and therefore dividend growth than the rest of the portfolio. It's like you make these adjustments, they do impact the portfolio in the short term, but we think in the fullness of time, it'll provide better growth and you'll actually end up with a better yielding portfolio once you get a few years down the track. It is a feature of the overall market here that the yield has been trending down.
As we've seen more and more technology, healthcare stocks take bigger and bigger positions in the market, they're all on very low yielding. It is actually a natural outcome of the way the market is changing, the way business is changing, and in fact, we're really heading down a path that we see in the U.S. already, where you have much larger technology companies there, and therefore you're seeing the yield on that U.S. market is actually quite low as well. It's probably around 2%, something like that. The more we get successful growth companies in the technology, healthcare sector here in Australia, which would be great, it will come with lower yield, but hopefully better total return in the long run. When you actually add that yield with growth.
We're still very conscious of the income objectives of our shareholders as well.
Yeah. Well, that's right. We do maintain these positions, and we do get asked sometimes around our holdings in the banks and other stocks. We think Amcor's got a good investor base, but it's probably a bit lower growth. They certainly supply us with good income to our shareholders, but at the same time, we're trying to build around those positions with some good growth companies.
In the immediate term, the small size of the investment won't make a material impact.
No.
I've got a few other questions here, but I might just head to the phone, conscious that people on the phone haven't had a chance to ask a question. Vincent, you might just remind them about the process for asking a question on the phone, I should say.
Sure. Just as a reminder, ladies and gentlemen, if you do wish to ask a question via the phone, please press star one on your telephone keypad and wait for your name to be announced. At the moment, we have no questions at this time.
Well, we'll come back to you, but I'll go through some of these other questions here. I guess one of the questions we have been asked is: How does the current premium to NTA match the average over recent past? Well, I'll answer that question. It is actually a lot higher than it has been probably more recently, but we have been up at a level of 10% probably within the last 10 years. We suspect it's probably because around certainty of dividend that has been displayed by AFIC over the last couple of dividend payments. We wouldn't necessarily encourage people to buy at such a large premium. What people need to be aware that, when it gets to this point, that it puts a lot of pressure on potentially the share price performance if you're starting at such a high position.
Yes, we have been there before. Typically, when the markets are feeling nervous or there's a nervousness around consistency of dividend within the market, which I suspect this is the reason why we're trading at the current level of premium. The other question, which I'll answer as well, is about Or perhaps I'll pass over to Mark, actually. Do we look to outperform passive exchange-traded funds such as Vanguard?
Well, that would certainly be a strategy. Obviously even going in a passive index, you don't actually get the index, you get the index less their costs. You have to look at that, but that's certainly a company objective is to outperform those over the long term.
Comment on Telstra and breaking into three separate companies. What does that mean for the long-term outlook for the technology sector? Well, they're really telecommunications sector.
Yeah, sure. We have a holding in Telstra, which we think they're uniquely positioned as the market leader as the industry's becoming more rational in terms of the pricing environment. They're certainly well-positioned to be able to benefit from that on the medium-term view. The optionality around splitting the business, in our view, does create long-term value. It's sort of the upside that we're not paying for at the moment. There's no commitment to splitting the business at this stage, but it's certainly something in the range of options that the management team can look at some point in the future.
Got a question here about: Would AFIC ever buy into a successful Australian-listed global LIC? Well, we're looking to potentially, over the longer term have one. I think the answer is no to that. I think that's a relatively straightforward answer to that question. There's a couple of questions about the market. Where do we see the market and value of the shares heading in 2021, and do we actually think that the market's currently in a overvalue or in fact, actually in a bubble?
I'll steal a quote that one of our former chairman, Bruce Teele, who I worked with for a long period of time, used to tell me, and having been in the markets now for about over 25 years myself, I think this is completely accurate. With that sort of experience, I can tell you that I've absolutely no idea where markets are going over the next 12 months. It's impossible to predict. We don't try and predict that. The only time we'll generally make observations, if you remember back in March, we did a conference update, and we did feel then, given the extent of the sell-off, that every time we'd seen a sell-off like this in history, and we had a chart go back 100 years, it was inevitably a buying price. That's what's played out to this point. The market's had a pretty good recovery.
I think we'd probably say it's become sort of fully valued. I think most brokers would say it's harder to find pockets of value anymore with that value recovery. With that view that things look a bit fuller now, with interest rates being where they are, it's hard to say things are overvalued at the same time. If you have a look at the yield you can get on the market, compared to interest rates, it still provides an attractive income source. I guess we're feeling neutral on the market at the moment, reminding everyone that we're what you'd call more of a bottom-up investor. We're just trying to find great companies, buy them when we see value, hold them for the long term, the market will be the market. It'll go up and down. We don't tend to take views. We just try and stay fully invested throughout the entire cycle. It's very hard to predict where markets are going.
Just, we have a question on the phone, so I might pass back to the phone questions, Vincent.
Yes, we do have one on the phone, from the line of Clive McPherson from the Australian Foundation Investment Company. Please go ahead.
Two questions, please. How much is the interim dividend? You mentioned it was paid on 23rd of February. Is it still AUD 0.10? That's the first part.
Yes.
Secondly. Pardon?
Yes, it is AUD 0.10. Yeah.
All right. Thanks. Will information meetings occur back in March, like in Melbourne, which they used to before COVID? Is that possible or not?
Yeah, no, we're planning to do another webinar at that stage. The problem is you've got to book well in advance for these things. It's still very uncertain.
Right.
We'll be doing a webinar covering, as we have done today.
Including the phone again? The phone as well?
Yeah, we'll do the phone webinar again, but we're certainly not in a position to have physical meetings by that time. We're obviously very keen.
Yes
To get back to those.
Thank you very much.
It's certainly an objective of ours. Yep.
Okay. Thanks.
Okay.
Sorry, just on that, too, it's important that we want to do those meetings because it gives us a chance.
Yeah
Or for shareholders to meet us, talk to us, and we have to be accountable for the portfolio. We're very happy to get back to those when we can.
I might just talk about our approach to ESG. There's a couple of questions about fossil fuels and also Rio, obviously, with the situation with caves within Western Australia.
Just at a high level, we see ESG being embedded in our investment process. It's not a separate item. In fact, when you look through those factors on ESG, they really have been a part of what we do since, well, ever since I've been involved. The G in it, the governance, the governance of the company has always been front and center for us considering an investment. That's always been the case. Also, social issues. For example, we don't invest in pure play gambling stocks. We never have. We're not proposing to change that as well. Then the environmental piece really comes through that, as a long-term investor, these issues usually end up being an issue for the company, in particular, their ability to grow and develop profits over the long term.
If you look at, obviously, the obvious sector in that is the oil and gas sector. As I touched on earlier in the meeting, we are doing a review of those stocks. A key part of that is how those businesses are going to develop over the long term with renewables. If we feel that's going to impact the long-term earnings potential, that creates, I guess, a negative headwind for us and creates some concern. All those issues are embedded in terms of us taking that longer-term view of a business. We want to be in businesses that have a sustainable competitive advantage, not a structural headwind. A lot of those E factors come into play with that. It's an important part of our entire investment process, but we're happy to keep talking about that, and we'll probably talk more about that into the future.
David, you just want to cover on Rio, what we did there in terms of conversations with the company?
With Rio, we had a number of conversations with both management and at the board level. Our view there was really that we're the long-term holder of the assets of the business. There's been a lot of management change in recent months as a response to what happened there at Juukan Gorge. We still believe Tier 1 assets, there's a great opportunity. They're very uniquely positioned in owning those assets. There's an opportunity for further returns to come for shareholders. With the management changes, we feel encouraged the changes that the company has made in terms of the consultation, the changes they're looking to make in terms of their mine planning going forward. We are certainly aware of the issue, and we continue to monitor it very closely.
I think the important point. We're the shareholders. They're our assets. If we don't like what's going on, rather than us shifting off the register, we want to stay a part of those assets. What we do is we give our views to the company, which is what occurred. What happened is that rather than us moving, management moved. We've now got a new set of management in there, and we continue to be an investor in those assets, and we'll continue to give feedback to the company and the board if we're not happy with what we see. That's really the model of how we treat all our investments.
Just on the banks, I guess we answered this question a bit before, David. Do the banks have excess capital going forward?
I think we're encouraged by the provisions that the banks have taken, and we feel that that certainly seems appropriate in the worst case scenario that was predicted around March and April just has not materialized. We feel encouraged in terms of the capital position, but also in terms of dividend with payout ratio restrictions being lifted. The ability for the banks to generate and pay out more income is a real opportunity for the portfolio in the near term.
The recent dip in CSL, has that provided any opportunities, or is that a buying opportunity, or are you sort of comfortable with?
Well, yeah, you would've seen, Geoff, just on slide 11 there, we mentioned some recent transactions during the period. We had been buying CSL, and we see the company suffering from two short-term headwinds. The first of those is just with the COVID-19 situation being prolonged in the northern hemisphere, donors are unable to access collection centers to be able to donate plasma. The second is the rising Australian dollar is a headwind for the business. Both of the issues the company's facing at the moment we see as being temporary, and we feel this is a fantastic long-term opportunity for the business, really well-positioned within the market where they operate. There's a long history of strong returns from capital allocation, and we rate the management team very highly.
Okay. We might just go back to the phone now, see if there's any further questions.
No, we have no further questions on the phone at this time.
Okay. Well, I think they're the substantive questions that I've got here, so we might finish there. The other ones that have come through, I'll respond via email. There's a couple of others which I will get back to people on. Yep. Mark, do you want to wrap up?
Thank you for your participation in this call. Communication to our shareholders is a very important part of the company, as we want to be open and transparent and give shareholders every opportunity to ask questions as to what we're doing in the portfolio. As we said, we'll be doing these on a more regular basis going forward. We are keen to get back to the shareholder presentations where we can actually meet and talk with shareholders. We look forward to that day. We hope these presentations are useful for shareholders, and we really appreciate the questions today. Thank you.