WAM Capital is expected to announce an 8 per cent rise to its full-year dividend to 14¢ a share, as the $902 million listed investment company unveils its profit on Monday.
The company, which is chaired by LIC veteran Geoff Wilson, will post a net profit of $54 million for the year to June – down from $68.3 million because of movement in the group’s portfolio value.
“The full-year dividend represents an annualised fully franked dividend yield of 7 per cent,” the company will say in its statement to be published on the Australian Securities Exchange on Monday.
WAM’s portfolio, which counts companies such as airline Qantas Airways, retailer Harvey Norman and investment group Hunter Hall Global Value among its top 10 holdings, posted a 14.7 per cent return for the year to June 30 – beating its benchmark by nearly 10 per cent.
“In what was a difficult and volatile year for equity markets, the investment portfolio out-performed the market by 9 per cent to deliver shareholders an exceptional result,” Mr Wilson said.
“WAM Capital’s increased size reduces the company’s fixed administration costs and significantly increases liquidity.”
The results come amid a flurry of capital raising and public listing activity in Australia’s listed investment company sector. Perpetual raised $250 million for its first LIC, while Perennial Investment Partners also launched an LIC version of its wealth defender strategy.
Contango Asset Management’s income generator LIC debuted on the ASX on Friday at $1.01 before closing at $1.02, after raising $72 million from investors.
Mr Wilson is seeking to raise up to $550 million for the charity-focused Future Generation Global Investment Company.
He believes DIY super funds will be the driving force behind the take-up of LICs in the near future, as investors continue combing for yield amid record low interest rates.
“We’re seeing more and more DIY fund investors moving away from managed funds into LICs, as they [LICs] can provide a consistent stream of fully franked dividends,” he said.
But opportunities for investment managers remain tight amid a low-growth environment. Chris Stott, chief investment officer of WAM Capital, said the Australian sharemarket was operating in the “mature stages” of a six-year bull market, which followed the early-2009 lows.
“In FY2016 we expect the Australian equity market will continue to benefit from low interest rates and improving domestic economic conditions,” he said.
“The upcoming reporting season will provide a good insight into the health of Australian companies. We believe strong corporate earnings are needed to see equities trade higher.”