The Geoff Wilson-backed WAM Global will boost its dividend after reporting a substantial increase in profit on the back of a solid investment performance in the year to the end of December.
WAM Global will declare a fully franked interim dividend of 5c a share — 66.7 per cent more than the final dividend for the 2020 financial year to the end of June and consistent with the company’s investment objective of delivering investors a stream of fully franked dividends.
That follows an 80.1 per cent increase in operating profit before tax to $70m and a 79.8 per cent lift in operating profit after tax to $49m in its half-year results for the 2021 financial year, which has also seen the company’s profits reserve rise to 43c a share, or 4.3 years of dividend coverage.
Stock selection paid off for WAM Global in a turbulent period for global markets last year as the COVID-19 pandemic caused the fastest move into a bear market in history and unprecedented fiscal and monetary policy stimulus subsequently sparked the fastest-ever bull market.
The WAM Global investment portfolio increased 9.3 per cent in the 2020 calendar year, outperforming its benchmark MSCI World Index in Australian dollars by 3.7 per cent.
In the 2021 financial year to date, the fund has achieved 5.8 per cent outperformance.
Among its top shareholdings at the end of December were Avantor, Intercontinental Exchange, Home24, Stroer & Co, Fiserv, Tencent, APi Group, AutoZone, SoftwareONE, The Simply Good Foods Company, Fidelity National Information Services and Visa.
After boosting the funds’ cash reserve to 18 per cent as COVID-19 took hold early last year, WAM Global portfolio managers Catriona Burns and Nick Healy initially focused more on companies that would thrive during the pandemic, before investing more in companies that would benefit from a broader economic recovery based on vaccinations.
By the end of December, the fund had wound its cash reserve bank to 3.3 per cent.
“We’re pleased with the performance particularly given the initial fallout from COVID at the start of the year and then the subsequent bounce as we saw unprecedented stimulus and vaccine developments,” Ms Burns told The Australian.
“Early last year we were relatively cautious since we focus on companies with strong industry positions, high-quality management teams and resilient earnings profiles, and when COVID-19 hit we saw that balance sheet strength was very important than ever, particularly when we didn’t initially know how much stimulus would be provided by central banks and governments.”
In the early stages of the sell-off, the fund focused on some of the large high-quality US and Asian tech companies for safety, and COVID-19 beneficiaries in areas such as home dining and entertainment.
“Later in the year we saw the valuations on some of the early COVID winners in the US market rise to levels that we weren’t comfortable with, so we increased our weighing in Europe,” Ms Burns said.