WAM Leaders Ltd (ASX: WLE) has announced it will increase its dividend payment by 6% in its FY19 half-year result.

WAM Leaders is a listed investment company (LIC) operated by investment firm Wilson Asset Management to invest in shares predominately in the ASX 200 Index.

What WAM Leaders Reported

It was a tough six months for share markets. The S&P/ASX 200 Accumulation Index (ASX: XNT) fell by 6.8% over the six months to 31 December 2018, and the WAM Leaders portfolio fell even more – it dropped 7.1% before the pain of fees and taxes. However, WAM Leaders can still say that since inception in May 2016 it has outperformed its benchmark by an average of 1.5% per annum before fees and expenses.

The investment performance translated into the accounts showing revenue falling to negative $59.1 million and a loss after tax of $42.5 million.

In net tangible assets (NTA) per share terms, it decreased by 8.5% during the period, including the 2.5 dividend payment and paying corporate tax.

WAM Chairman and Chief Investment Officer Geoff Wilson said: “Given the heightened volatility during the period, we increased our exposure to defensive sectors and invested in gold mining companies as a result of improvements in the US-China trade war.”

However, WAM Leaders can utilise previous profits to pay out a higher dividend. WAM Leaders has declared an interim dividend of 2.65 cents per share, which is 6% higher than the prior payment of 2.5 cents.

WAM Leaders is also going through the process of acquiring Century Australia Investments Limited (ASX: CYA), a smaller LIC valued at around $90 million that Wilson Asset Management also manages. On 12 February 2019 Century Australia shareholders voted in favour of the merger and on 18 February 2019 the Federal Court of Australia approved the merger.

Mr Wilson spoke of how the LIC structure allowed it grow the dividend despite the portfolio decline, “The dividend has been achieved through the performance of the investment portfolio since inception and the profits reserve available.”

WAM Leaders is trading at roughly its underlying assets and it now has a fully franked dividend yield of 4.5%. With the upcoming expected reduction of the management fee by 0.25%, thanks to the merger with Century Australia, WAM Leaders is more attractive than before the merger, but an ASX ETF like BetaShares Australia 200 ETF (ASX: A200) could also be one to consider.

 


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