WAM Capital Limited reports half-year profit up 48%

WAM Capital Limited (ASX: WAM) reported its half-year result to 31 December 2017 this morning.

WAM Capital is the largest listed investment company (LIC) run by Wilson Asset Management and also has an excellent long-term track record.

The most impressive figure from the report was that net profit increased by 48% over the prior corresponding period. However, the change in values of assets can heavily influence this figure positively or negatively in each report.

The LIC prefers the net tangible asset (NTA) per share measure, which grew by 9.1% for the six months to 31 December 2017 after adjusting for dividends.

The key thing for most investors to note is that the dividend has been increased by 3.33% to 7.75 cents per share from 7.5 cents. This is favourable with the earnings per share for the half-year of 13.66 cents, which is up from 10.57 cents. It’s normal for WAM Capital to pay the same dividend in the second half of the year.

The company said that the investment portfolio increased 10.4% during the six month period, outperforming the S&P/ASX All Ordinaries Accumulated Index which rose by 9.3%. The investment performance was achieved with an average cash weighting of 27.6%.

Geoff Wilson told the AFR that the LIC had doubled its cash holding since the end of the year and is now looking to go hunting for bargains.

Mr Wilson said “As an investor, this is when we get excited. We are waiting for opportunities. You really need to see the dust settle. Obviously we will be nibbling, and of course it’s a stock-by-stock decision.”

“In markets like this you need an active manager. The big debate with active versus passive is always a cyclical debate, and it tends to be near tops of markets.”

Foolish takeaway

WAM Capital continues to be one of the best LICs for income-focused investors, although a couple of the other WAM products could be even better.

Assuming a 7.75 cent per share dividend payout in the second half of the year, WAM Capital is currently trading with a forward grossed-up dividend yield of 9.34% for the next year.

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Motley Fool contributor Tristan Harrison owns shares of WAM Capital Limited. 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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