By Prashant Mohan, CMO, Sharesight
Listed Investment Companies (LICs) are a popular choice for many Australian investors, often favoured for their diversified exposure and potential for steady, regular franked dividend income. Some might view LICs similarly to other managed investments, but their unique structure as closed-ended funds listed on exchanges like the ASX means there are specific metrics investors must track to truly understand their value and performance. This blog will explain the key metrics every LIC investor should monitor and how you can track them effectively using Sharesight.
What makes LIC investing unique?
Unlike open-ended funds, LICs have a fixed number of shares traded on an exchange. This means their share price is driven by market supply and demand, and can deviate from the underlying value of the assets they hold — known as the Net Tangible Assets (NTA). This potential divergence between share price and NTA creates both opportunities (e.g., buying assets at a discount) and risks (e.g., paying a premium) that require careful monitoring when buying or selling LICs.
The 5 key metrics of LIC investing
It’s crucial to track specific LIC metrics to effectively manage your portfolio. The following should be part of any LIC investor’s toolkit:
1. Premium/discount to Net Tangible Assets (NTA)
This refers to the difference between the LIC’s current share price and its per-share NTA (value of underlying investments minus liabilities). LICs typically report NTA monthly via ASX announcements.
Premium/Discount = (Share price – NTA per share) ÷ NTA per share
This tells you if the market values the LIC above (premium) or below (discount) its underlying asset value. Buying at a discount can offer potential upside, while a high premium might signal overvaluation.
While you’ll get the NTA from ASX announcements, a portfolio tracker like Sharesight accurately tracks the LIC’s share price in real-time. This allows you to easily compare the reported NTA with the current market price tracked in your portfolio, helping you monitor the premium or discount to NTA.
2. Total shareholder return
This refers to the overall shareholder return an investor receives, combining capital gains (share price changes) and dividends (including franking credits).
Total shareholder return is the ultimate measure of your investment’s performance for you. It captures both capital growth and income components, reflecting the true impact on your wealth.
This is where Sharesight excels. It automatically calculates your shareholder return for each holding and your overall portfolio, incorporating all capital gains, dividends and franking credits based on your actual buy/sell dates and holdings.
3. Dividend yield
Dividend yield is the annual dividend per share relative to the share price. For Australian investors, this return can be further boosted by franking credits, which are imputation credits representing tax already paid by the LIC.
Dividend Yield = Annual dividend per share / Current share price
Dividend yield is essential for income investors. Tracking both the yield and the grossed-up yield (which includes franking credits) gives a clearer picture of the true pre-tax income your investments generate.
Sharesight automatically tracks all dividend payments, including amounts, dates and franking credits. Its taxable income report also clearly displays your dividend income, including franking, making tax time much simpler.
4. Tracking dividend income
Tracking dividend income involves monitoring the actual cash flow generated by your LIC dividends over specific periods (monthly, quarterly, annually). It focuses on the absolute dollar amounts received rather than just the yield percentage.
This is essential for investors relying on their portfolio for regular income, planning cash flow or tracking progress towards income goals. Seeing a clear picture of income trends helps in budgeting and assessing if the portfolio meets income requirements.
Sharesight makes tracking your actual dividend income straightforward. Because it automatically records dividend payments announced by the LICs you hold (including payment dates, amounts and franking credits), you can easily visualise your income stream.
- The taxable income report allows you to see all dividends received within a specific date range (e.g., financial year, calendar year, specific quarter), providing a clear historical record of your income.
- The future income report uses announced dividend data for your holdings to project expected income in the upcoming months or year, which is invaluable for cash flow planning.
5. Cost base of DRPs
Dividend reinvestment plans (DRPs) automatically reinvest dividends in new units in LICs instead of paying out cash, which can increase your exposure to the LIC. DRPs can help you grow your holdings in a company or fund without paying additional brokerage fees, however they can also make record-keeping more challenging.
Sharesight helps track DRPs/DRIPs automatically (for ASX and NZX assets), reducing manual admin on your part. The cost base for every dividend reinvestment is also automatically tracked, helping you make accurate tax filing records and decisions.
Track your LICs with confidence
Get the full picture of your LICs, including price, dividend income, franking credits and more, all tracked automatically in Sharesight. Start your free trial today.
