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Why WAM Leaders Ltd could be the best large cap LIC

There are a number of listed investment companies (LICs) that focus on the large end of the Australian share market.

There are some that have been around for many decades like Australian Foundation Investment Co. Ltd (ASX: AFI) and Whitefield Limited (ASX: WHF).

There are also newer LICs that have only joined the ASX in the last few years like WAM Leaders Ltd (ASX: WLE).

WAM Leaders is run by Wilson Asset Management, the high-performing investment team that also run several other LICs like WAM Capital Limited (ASX: WAM) and WAM Microcap Limited (ASX: WMI).

Earlier this week WAM Leaders released its results for the half-year to 31 December 2017. Some of the highlights included:

  • Investment portfolio delivered returns of 11.9%, outperforming the index by 3.5%
  • Profit before tax increased by 158.8% to $62.7 million
  • Fully franked dividend of 2.5 cents, an increase of 150%

WAM Leaders’ before tax net tangible assets per share (NTA), after adjusting for dividends, increased by 4.5% for the six months to 31 December 2017.

Geoff Wilson, Chairman, said “WAM Leaders will pay an increased fully franked interim dividend of 2.5 cents per share, consistent with the Board’s commitment to provide a growing stream of fully franked dividends to shareholders while preserving their capital and delivering capital growth”.

Interestingly, Mr Wilson also went on to point to the value that WAM Leaders is currently trading at, he said at the time “Currently WAM Leaders is trading at a 1.4% discount to NTA as short-term arbitragers and quant traders sell the shares they had purchased during the final months of the option issue. Once this selling pressure has abated, we believe equilibrium will return to the WAM Leaders share price. It is worthwhile to note that all other WAM listed vehicles are trading at a premium to NTA”.

Foolish takeaway

All WAM Leaders needs to do is outperform the index after fees and deliver a large fully franked dividend to be a better choice than other large-cap LICs and index products. It’s meeting that goal so far, I believe it could be well worth a buy at the current prices.

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Motley Fool contributor Tristan Harrison owns shares of WAM Capital Limited and WAM MICRO FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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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