Delivering Income Through the Investment Cycle
In a part of the market better known for growth than income, Mirrabooka’s portfolio has outpaced the ASX with total returns of 11.5% per annum since listing, including franking. As we’ll explain here, it’s the Listed Investment Company (LIC) structure that has provided an important foundation for those returns, by allowing us to deliver consistent, fully franked dividends without sacrificing long-term capital growth.
MIR NTA Total Return Since Listing*
*Both MIR NTA and Index returns assume an investor can take full advantage of franking credits and dividends are reinvested. MIR’s performance figures are after fees and expenses, income tax and realised capital gains tax.
Small and mid-cap companies generally reinvest heavily to support future growth, which means portfolio income yields are often relatively modest; around 2% per annum across the sector. Against this backdrop, Mirrabooka has been able to deliver a longstanding stream of fully franked dividends through a disciplined investment process and prudent capital management.
Mirrabooka’s structure plays an important role in this outcome. When Mirrabooka successfully exits an investment - whether through a takeover, the investment thesis has played out, or simply trimming positions after substantial price increases, realised capital gains are generated within the company. Rather than letting those benefits sit idle, we distribute them back to shareholders through fully franked dividends.
Over time, this has enabled the company to deliver a dividend framework that includes both ordinary and special dividends. Realised gains can be retained during stronger periods to support dividend continuity during more challenging market environments. But equally important, special dividends are paid when reserves are particularly strong - as we know that franking credits have more value to shareholders than the company.
Importantly, this approach has helped maintain dividends across market cycles. Since listing in 2001, Mirrabooka has never cut its ordinary dividend, even amid major market downturns such as the Global Financial Crisis and the COVID pandemic.
Mirrabooka Annual Dividends:
When Volatility Creates Opportunity
There are two dominant forces driving uncertainty across global markets: the Iran conflict and the rapid acceleration of artificial intelligence (AI). Market volatility is creating attractive opportunities for active investors.
The ongoing Iran war continues to inject inflationary pressure and uncertainty into the economy, particularly for smaller and mid-cap companies where margins can be more exposed to rising costs and softer consumer demand. While short-term earnings disruptions are likely, Mirrabooka remains focused on the long-term outlook for the businesses it owns.
The key question guiding portfolio decisions is whether current disruptions materially alter a company’s earnings power over the medium-to-long-term. In most cases, the answer remains no. This long-term lens allows Mirrabooka to look through short-term market noise and identify opportunities where quality businesses become oversold amid heightened volatility.
At the same time, AI is reshaping industries at an unprecedented pace. What began as experimentation has evolved into a global investment arms race, with companies increasingly deploying AI to transform full business processes and drive both productivity and revenue growth.
While this rapid innovation is creating uncertainty around competitive advantages, employment disruption and future winners, Mirrabooka sees opportunity emerging from market overreaction.
Many high-quality technology businesses have experienced sharp share price declines as investors question the durability of their competitive moats in an AI-driven world. Mirrabooka is actively assessing which companies possess enduring strategic advantages that remain difficult to replicate, even as technology evolves rapidly. This dislocation is creating attractive valuation opportunities in quality growth businesses.
A recent example is our increased investment in Macquarie Technology Group (ASX:MAQ). Following earlier strong gains and prudent profit-taking, we’ve added to the position as AI-driven demand for data centre infrastructure accelerates. MAQ’s expanded Macquarie Park facility represents a highly strategic asset, well-located in a market where securing high-quality data centre sites has become increasingly difficult amid surging cloud and AI-related demand.
The investment reflects Mirrabooka’s active approach to capital allocation, dynamically managing positions to capture long-term growth opportunities while navigating periods of elevated market volatility.