WAM Capital Limited (ASX: WAM) announced its plans to pay another big half year dividend in its most recent financial report.
WAM Capital is a listed investment company (LIC) operated by investment firm Wilson Asset Management. Its role is to invest in shares for shareholders, make profits and pay dividends – typically most of the profit it makes each year.
What WAM Capital Reported
The S&P/ASX All Ordinaries Accumulation Index declined by 7.3% during the six months to December 2018 and the S&P/ASX Small Ordinaries Accumulation Index dropped 12.7%.
In comparison, the WAM Capital portfolio decreased by 9.3%, it underperformed its benchmark – the All Ordinaries Accumulation Index.
The decline in the portfolio value led to the WAM Capital board declaring a fully franked dividend of 7.75 cents per share, which was the same as last year.
WAM Capital said there were a number of local and international issues that led to market volatility including slowing economic growth, political instability, the US-China trade war, Brexit, rising interest rates, quantitative tightening, the Royal Commission and falling Australian house prices.
Based on all of the above reasons, WAM Capital increased its cash position to 43.9% of the portfolio to protect shareholder capital and reduced its holdings from 113 to 89 individual businesses.
Some of the best performers in the WAM Capital portfolio were Afterpay Touch Group Ltd (ASX: APT), Macquarie Media Ltd (ASX: MRN) and Bravura Solutions Ltd (ASX: BVS). Some of the worst performers were Gtn Ltd (ASX: GTN) and Seven Group Holdings Ltd (ASX: SVW).
Since the end of the December, the WAM investment team has deployed some of the cash (now at 35% of the portfolio) due to China increasing stimulus and the US Federal Reserve halting rate increases.
If WAM Capital repeats the 7.75 cents per share dividend declaration in six months time then it is trading with an annualised fully franked dividend yield of 7%, however it is valued at a premium of more than 20% to its underlying assets, so if you are looking to buy it might be better to wait for that premium to reduce before considering buying shares.