Is the Naos Emerging Opportunities Company Ltd share price a buy for its 7.8% yield?

Credit: GotCredit

The Naos Emerging Opportunities Company Ltd (ASX: NCC) share price is down 12% since the $1.50 high at the start of the year.

Naos Emerging Opportunities Company is a listed investment company (LIC) run by NAOS Asset Management. It isn’t one of the oldest or biggest LICs on the ASX but it has one of the most impressive records in my opinion.

The LIC aims to give exposure to undervalued emerging companies with an industrial focus. This means the companies it looks at generally have market capitalisations under $250 million.

It is completely index unaware, it doesn’t need to take large weightings to companies it doesn’t think have good prospects.

Over the past five years the LIC’s portfolio has returned an average of 17.87% per annum before fees over the past five years and 13.66% per annum before fees over the past three years. This performance soundly beats the market’s return and its benchmark.

I like that the Naos staff have significant alignment of interests with shareholders because they themselves own over 10 million shares. Indeed, it was the fact that directors recently bought shares that prompted me to write this article. Warwick Evans acquired 22,880 shares, Sebastian Evans acquired 8,227 shares and David Rickards acquired 17,984 shares.

This Naos LIC has an excellent track record of increasing its dividend each year and it also has a solid profit reserve too. It has increased its dividend each year since it started paying one in the second half of the 2013 financial year. In its recent half-year result it increased the dividend by just over 7%.

Foolish takeaway

Naos currently has a trailing grossed-up dividend yield of 7.82%. I think this Naos LIC is a really good option for income investors and also for people who want a combination of dividend and capital growth returns. I’d be happy to add shares at the current price along with the directors who bought shares.

If you want more income ideas then you should check out this top dividend stock which I own, it’s growing its profit and dividend at a fast rate each result.

OUR #1 dividend pick to grow your wealth over the new financial year is revealed for FREE here!

Financial year 2018 is here and The Motley Fool’s dividend detective Andrew Page has revealed his must buy dividend share to grow your wealth in 2018.

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor Tristan Harrison owns shares of NAOS EMERG 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 Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.