WAM Research will raise its interim dividend by 7 per cent to 4¢ per share – the highest half-year payout in more than a decade – as the listed investment company prepares to reveal its profit next month.
The LIC, which has a market value of $170 million, will raise its interim dividend from last year’s 3.75¢ in an announcement to be revealed on the Australian Securities Exchange on Tuesday.
It comes after WAM Research recorded an 11.7 per cent return for the half year to December, outperforming the S&P/ASX All Ordinaries Accumulation Index’s 2.3 per cent gains.
The LIC is expected to post a net profit of around $10 million for the six months to December.
“We’ve been nervous about the performance of the domestic economy over the past 12 months, so companies we’ve been looking to identify were the ones that would deliver growth by acquisition or organically. These companies had those attributes,” Mr Wilson said.
WAM Research returned 15.1 per cent for the year to December, beating the index’s 5 per cent gains.
Mr Wilson, who chairs several other listed investment companies under the Wilson Asset Management banner, is highly sceptical of growth prospects in the Australian economy this new year and argued the onus was on the Reserve Bank of Australia to slash rates to stimulate the local market. He is calling for a 50 basis point to the current 2.5 per cent cash rate, which is already at its lowest levels in Australian economic history and said the local economy had been “struggling throughout 2014″.
“Interest rates have to fall further – we’re seeing no signs of a pick up in the economic activity from the companies we’re speaking to,” he said.
“I think the second half of the year will be a better one in terms of how the economy performs. We’ll see positive impacts from the stimulus that will come through from lower interest rates, a lower oil price and lower exchange rate.”
The Australian share market pulled back in September and October following fears around global growth, which impacted on 2014’s returns from local equities.
Mr Wilson said the LIC remained cautious about the Australian economy in 2015, but rate cuts from the RBA should help inject some life in economic activity to spur companies to take on more risk for growth.
He also expects the market for initial public offerings to “stay strong” for the next six months, and heightened level of mergers and acquisitions activity with “corporate balance sheets in great shape”.
WAM Research chief executive Kate Thorley said the listed company remained committed to delivering fully franked dividends to shareholders over the long term. “The investment portfolio’s positive performance has allowed the board to raise the interim dividend,” she said. WAM Research’s share price has risen 7.2 per cent to $1.18 in the past 12 months.