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Djerriwarrh Investments (ASX: DJW) has posted a 4.6 per cent rise in full-year net profit to $41 million, but its portfolio return of 2.8 per cent significantly trailed the broader market after overweight positions in some of the ASX 200's worst-performing stocks weighed heavily on performance.
The result for the 12 months to June was up from $39.2 million in the prior corresponding period, with the net operating result edging higher to $41.4 million from $40.8 million.
Revenue from operating activities dipped 0.7 per cent to $36 million, offset by an 11.4 per cent jump in option income to $18.6 million.
The investment group's portfolio return of 2.8 per cent including franking credits fell well short of the S&P/ASX 200 Accumulation Index return of 7.2 per cent on the same basis, marking a gap of 4.4 percentage points.
Over 10 years, the group's annualised portfolio return of 8.2 per cent also lagged the index benchmark of 10.9 per cent.
Djerriwarrh attributes the underperformance to overweight holdings in several of the ASX's steepest fallers during FY26.
CSL (ASX: CSL) shares tumbled 52.4 per cent over the financial year, Cochlear (ASX: COH) plunged 59.6 per cent and ARB Corporation (ASX: ARB) fell 43 per cent.
The group also flagged its overweight position in Equity Trustees, owned by EQT Holdings Ltd (ASX: EQT), as a drag on returns.
EQT shares plunged from a high of $34.50 to a close of $16.30 at the end of June as the company was caught up in the collapse of the First Guardian super scheme.
A holding in BHP Group (ASX: BHP), which was reduced to an underweight position through the exercise of call options, further crimped portfolio performance.
On the positive side of the ledger, Rio Tinto (ASX: RIO), Woodside Energy (ASX: WDS), Woolworths Group (ASX: WOW) and Pro Medicus (ASX: PME) were among the top contributors to returns during the year.
“We've lifted our full-year dividend to 15.75c per share, fully franked, up from 15.5c last year," says Brett McNeill, the Djerriwarrh portfolio manager.
"On a grossed-up basis that's a 7 per cent yield on the net asset backing, which is nearly 3 percentage points above the broader market.”
Net tangible assets per share fell to $3.22 from $3.40 a year earlier, reflecting the capital declines in the group's overweight positions with the portfolio valued at $855 million across 47 holdings at year end, with net debt of $45 million.
The group's management expense ratio improved to 0.41 per cent from 0.47 per cent in the prior year.
Djerriwarrh's option writing strategy, which forms a core part of its income generation approach, delivered the strongest growth within the result.
The $18.6 million in option income accounted for more than half of total revenue, underscoring the group's reliance on the strategy to support its above-market dividend yield.
Heading into FY27, Djerriwarrh says it is well-positioned to generate consistent fully franked dividend income in line with its strategy, while still maintaining exposure to potential capital growth from companies that trade at attractive valuations.
McNeill says he is confident in the portfolio's positioning, pointing to the quality of holdings and the income generation capacity of the options strategy.
“Djerriwarrh remains well positioned to meet our income-focused objectives, with additional growth upside through exposure to a diversified portfolio of quality companies," he says.
"We think this provides a strong investment alternative in the current market environment, particularly for investors putting a premium on attractive yields and consistent dividend income."
The Djerriwarrh result follows a leadership transition at the group, with long-serving managing director Mark Freeman retiring at the end of June and Alison Gibson appointed as his replacement.
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