Today, funds management business NAOS released its half-year results to investors.

NAOS operates the listed investment companies (LICs) NAOS Small Cap Opportunities Company Ltd (ASX: NSC), Naos Emerging Opportunities Company Ltd (ASX: NCC) and NAOS Ex-50 Opportunities Company Ltd (ASX: NAC).

Here’s a brief summary of what you missed.

NAOS Small Cap Opportunities Company

This LIC aims to invest in shares of businesses that are valued at between $100 million and $1 billion.

NAOS Small Cap Opportunities Company’s portfolio fell 11.5% (before fees) in the half year, but it outperformed the S&P/ASX Small Ordinaries Accumulation Index which fell by 12.75% over the same period.

The LIC took the decision to switch to quarterly dividend payments, rather than bi-annual. It declared a second-quarter dividend of 1.15 cents per share, bringing the dividends for the first six months to 2.5 cents per share, the same as last year.

Based on the last 12 months of dividends, it has a fully franked dividend yield of 7.8%.

NAOS Emerging Opportunities Company

This LIC aims to invest in ASX businesses that have market capitalisations below $250 million, which is the microcap end of the market.

Naos Emerging Opportunities Company’s portfolio fell by 10.7% (before fees) during the half year, also outperforming the S&P/ASX Small Ordinaries Accumulation Index.

This was the only NAOS LIC to not be changed to a quarterly dividend schedule, but the NAOS Board did decide to maintain the dividend payment at 3.75 cents per share, although Chairman David Richards said: “It is the Board’s aim to continue to be mindful of providing shareholders with a sustainable stream of growing fully franked dividends.”

An annual dividend payment of 7.25 cents per share means NAOS has a fully franked dividend yield of 6.7%.

NAOS Ex-50 Opportunities Company

This NAOS LIC hunts for shares valued at between $400 million to $6.5 billion or more accurately, shares outside the ASX 50.

NAOS Ex-50 Opportunities Company’s portfolio went down 8.56% (before fees) during the six month period.

The LIC’s Board decided to declare another quarterly dividend of 1.35 cents per share, bringing the half-year total to 2.7 cents per share. The half-year dividend has been slightly reduced compared to the 2.75 cents compared to last year. However, a full year of 1.35 cents per share will equate to 5.4 cents for FY19, whereas the FY18 full-year dividend was 5.25 cents.

A 5.4 cents per share full-year dividend translates to a fully franked dividend yield of 6.1%.

Management Comments

NAOS CEO Sebastian Evans said: “The equity market, especially within smaller listed companies remains extremely volatile which in many instances is due to significant variances in the domestic economy.”

Are the NAOS LICs buys?

Mr Evans went on to say that he believes most of the NAOS holdings will deliver earnings growth over the next year or two, which should lead to higher share prices and increasing dividends.

The NAOS LICs have high dividend yields, so they could be attractive for income, but 2019 could continue to be volatile for smaller ASX shares.


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Disclosure: At the time of publishing Jaz Harrison owns shares of NAOS Small Cap Opportunities Company, but that could change at any time.