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Here’s why this 5.2% yield should be tempting

It’s impossible for any economist or share guru to accurately predict which way share prices will go in the short-term. In the long-term shares have always gone up.

Inflation and population growth alone are two large reasons why shares will find it difficult not to produce good returns in the future. It’s important to always have exposure to the long-term growth of shares.

Most of the large Australian blue chips will be bigger in a decade than they are today. That’s why I think it’s important to invest in a listed investment company (LIC) like Whitefield Limited (ASX: WHF).

Whitefield has been one of the highest-performing LICs that focuses on the large caps of Australia like Commonwealth Bank of Australia (ASX: CBA), Wesfarmers Ltd (ASX: WES) and Macquarie Group Ltd (ASX: MQG).

According to Bell Potter’s quarterly LIC report Whitefield has grown its pre-tax NTA by an average of 12.8% per annum over the last five years, whereas the Australian Foundation Investment Co. Ltd (ASX: AFI), Argo Investments Limited (ASX: ARG) and Milton Corporation Limited (ASX: MLT) performance was 8.8%, 9.8% and 10% respectively.

Whitefield has been operating since 1923 and has been a great investment for shareholders. It has maintained or increased its dividend every year going back over 20 years. It had maintained its annual dividend at 17 cents per share since the GFC, but it has just increased its half-year dividend to 8.75 cents from 8.5 cents.

Foolish takeaway

The current grossed-up dividend yield is a pleasing 5.18%, which beats the income you could make from term deposits by some margin. Whitefield should be around for at least another 50 years as it slowly builds its net asset per share and gently increases the dividend.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers 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.

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