The Australian Foundation Investment Co.Ltd. (ASX: AFI) or “AFIC” share price could be a cheap buy today.
AFIC is a listed investment company (LIC) that has a $7.6 billion market capitalisation right now. The Aussie company is perhaps best known for being a tried and true dividend share, even when times are tough.
But after slumping 12.8% lower in 2020, is the Aussie LIC in the buy zone?
Why the AFIC share price could be cheap today
AFIC invests in a diversified portfolio of 8 to 100 companies across a range of industries. Given the scope of its investments, I like to compare the Aussie LIC to the S&P/ASX 200 Index (ASX: XJO).
While the AFIC share price is down in 2020, the benchmark ASX 200 index has also fallen 10.9%.
That could mean the Aussie LIC is in the buy zone but it may not be enough. One of the big advantages of LICs like AFIC is their historical dividend performance.
Even during the GFC, AFIC managed to still pay a strong dividend to investors. That’s impressive and one of the many reasons AFIC is a staple in a lot of Aussie portfolios.
Let’s consider an exchange-traded fund (ETF) as an alternative to AFIC. The Vanguard Australian Shares Index ETF (ASX: VAS) tracks the ASX 300 and is down 10.5% this year.
This Vanguard ETF is yielding 4.34% right now while AFIC is paying 3.84%. That could mean the AFIC share price isn’t as cheap as it initially looks.
However, it’s not that simple. If AFIC manages to maintain its dividends even as we see more ASX shares slash distributions later this year, that could be worth more than capital stability for many investors.
Foolish takeaway
I think AFIC is a solid ASX share in most portfolios. The Aussie LIC provides diversified exposure and its management fee is a lowly 0.13% per annum.
Whether the AFIC share price is cheap or not remains to be seen in 2020 but it could be a good buy after its 12.8% fall.
If you’re looking to diversify your portfolio in 2020, don’t miss these top picks today!
We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
More reading
- 3 ASX 200 shares to buy and hold for decades
- Is ‘sell’ really a dirty word? How to know when to let go of your ASX shares
- Woolworths facing fresh threat from Amazon.com
- Is this the start of a second COVID-19 share market crash?
- Is this why the NAB share price could be cheap today?
Motley Fool contributor Ken Hall owns shares of Vanguard Australian Shares Index. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The post Why the AFIC share price could be cheap today appeared first on Motley Fool Australia.
from Motley Fool Australia https://ift.tt/3hm2Mwf
Leave a Reply