Wilson Asset Management is one of the highest-performing investment managers in Australia year after year. It has a variety of listed investment companies (LICs) including WAM Capital Limited (ASX: WAM), WAM Research Limited (ASX: WAX), WAM Microcap Limited (ASX: WMI) and WAM Active Limited (ASX: WAA).
One of its newest LICs is WAM Leaders Ltd (ASX: WLE). Most of the WAM LICs focus on smaller, fast-growing shares whereas WAM Leaders focuses on the ASX200.
Why not just buy an ASX index fund?
Although WAM Leaders is only focusing on shares in the ASX200, it isn’t forced to have the largest companies as its biggest holdings.
WAM Leaders’ portfolio looks fairly similar to the index but still has large differences. Some of its top holdings (in order) include: National Australia Bank Ltd. (ASX: NAB), Westpac Banking Corp (ASX: WBC), Woolworths Limited (ASX: WOW), BHP Billiton Limited (ASX: BHP), Australia and New Zealand Banking Group (ASX: ANZ) and Computershare Limited (ASX: CPU).
Larger businesses may not grow as much as small caps over the long-term but they have the potential to be less volatile and pay larger dividends.
WAM Leaders recently revealed its FY17 results. Its portfolio returned 11.5% before taxes, fees and expenses, which was similar to the WAM Capital and WAM Research performances.
I think WAM Leaders has the investment team and strategy to beat the market over the long-term whilst possibly providing ‘safer’ returns.
Will WAM Leaders pay a big dividend?
The Wilson Asset Management team have stated that they would like to get the dividend yield up to a similar level to the other LICs, but this will take time because it needs to generate enough profit first. It would be a risky strategy to pay out all of the current profit because there would be nothing in reserve.
WAM Leaders currently has a grossed-up dividend yield of 3.86%.
I think WAM Leaders can definitely play a part in a LIC-focused portfolio. It is different enough from the other WAM LICs and large LICS like Argo Investments Limited (ASX: ARG) to be included in any income portfolio.
At the current price, I think WAM Leaders is worth a small buy and could become a better investment as the dividend yield gets bigger.
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Motley Fool contributor Tristan Harrison owns shares of WAM Capital Limited, WAM MICRO FPO, and WAM Research Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.