Milton LIC (ASX:MLT) review

Milton Investment Corporation limited (ASX:MLT) is an Australian Listed Investment Company that’s been around since 1938. They invest mainly in Australian listed stocks which make up just over 90% of its entire assets, and have provided shareholders great returns according to their three key mission statements;

” To Increase fully franked dividends paid to shareholders over time ”

“To provide capital growth in the value of shareholders investments”

“To invest in a diversified portfolio of assets which are predominantly Australian Listed companies and trusts”

Milton Investment Corporation Limited

From humble beginnings being incorporated in November 1938, to becoming listed on the ASX in 1958, Milton has grown to become the third largest Listed Investment Company in Australia, managing over (AUD) $3.1 Billion in funds.

The details

Milton has a diversified portfolio of listed companies and trusts as well as other interest producing securities and real estate properties. Milton’s team of professionals review its portfolio and make recommendations to its investment committee of four directors. Because it is managed by a small team, Milton has a very low annual management expense ratio of .14% ($14 per $10,000 invested per year).

Milton has a large holding in Banks and other financial stocks, and otherwise holds a very diversified portfolio as shown in the breakdown below:

CaptainFI, Captain FI, Milton, MLT

Performance

Milton has provided investment returns in line with the index over the long term. Below the total return of Milton is shown (blue is portfolio NAV, orange is share price) against the index. It is worth noting however, that the graph below does not include the effects of franking on returns. By passing on reliable fully franked dividends, Milton shareholders have benefited from Australian tax law franking credits and franking refunds. This is because franked returns come with a 30% corporate tax rate credit, and those on higher tax brackets simply pay a ‘top up’ tax and those on lower tax brackets get a refund for the difference.

CaptainFI, Captain FI, Milton, MLT

Milton is sitting on a franked dividend yield of 4.62% which is grossed up to 6.6% when accounting for the franking (Aussie tax break credit system). They have a strong history of increasing dividends and as shown below the dividend yield has increased consistently every year since the GFC. Prior to that, they had accelerated significantly, so the correction of the GFC saw this return to more sustainable levels.

CaptainFI, Captain FI, Milton, MLT

Apart from the amazing 6.6% grossed up dividend, Milton’s share price has also grown, making up the difference between the high dividend and the total shareholder return.

CaptainFI, Captain FI, Milton, MLT

Why I invest in Milton

I buy Milton because I see it as a great long term investment. I include it in my fortnightly investment decisions, and hope to acquire a sizeable chunk, by dollar cost averaging the dip and buying it whenever it is at a significant discount to its net asset value in accordance with my investing strategy.

CaptainFI

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5 thoughts on “Milton LIC (ASX:MLT) review

  1. unfortunately they have reduced their current dividend….
    5.8c interim dividend versus 9c last year. that’s a large cut.
    whereas AFI, AUI, MLT, WHF, MIR and WLE have not. in fact WLE have raised theirs slightly.
    the main advantage ( perhaps the only one ) of LICs over listed active or passive ETFs is the ability to smoothen out dividends, despite a bad year on the stockmarket, using prior years retained profits. If MLT can’t do that after only 1 bad year and despite their large size whilst others can, it is not a good look.
    perhaps explains why MLT is trading at a discount to MTA, whereas AFI, WHF, MIR, and WLE are trading at substantial premiums.
    the market has noticed.

    1. Wow yeah Carlos you are right that is a bit of a worry isn’t it! I have switched from targeting LICs into a more passive strategy now focusing on just my core holding of ETFs (A200 / VTS / VEU) so am paying less attention to the LICs or dividend smoothing – but I totally ack that for some retirees they want that stability / smoothing effect. Interesting you bring up some of the other LICs – the main ones on my ‘radar’ was MLT, ARG, BKI and AFI

  2. We have some serious amount of MLT and the SOL buyout has both share prices going through the roof. At this stage we have decided to wait it out and collect the dividends end up with the SOL shares. What’s you thoughts on the whole buy out and what are you doing with your MLT shares?

    1. haha mate if I had 20/20 vision I would have kept my Milton shares and rode the SOL boom too. Anyway, it is what it is, I was not to know they would do that and to be honest with the information I had at the time I would have still made the call to sell and move into the ETF structure. I do still quite like LICs in general but I believe from what I have read that for me, index fund ETFs are the way to go for the moment.

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