Dividends are much more reliable than share price movements. Who knows what the share market will do over the next week, month or year? A company has complete control over what dividend payments it makes, assuming it has the profit reserves to pay the dividend.
Listed investment companies (LICs) are businesses that purely invest in other businesses (shares) on behalf of shareholders. LICs tend to pay pleasing dividends due to the tax effective franking credit system that Australia has in place.
Here are two LICs on my dividend watchlist:
WAM Leaders Ltd (ASX: WLE)
WAM Leaders is a LIC run by Geoff Wilson and his investment team. Most of the other WAM LICs hunt for shares at the smaller end of the share market, but this one looks for opportunities in the S&P/ASX 200 Index.
Since inception in May 2016 the WAM Leaders portfolio has returned an average of 14.1% per annum before fees and other expenses. It has done this whilst keeping a decent amount of its portfolio as cash, reducing volatility for shareholders.
The WAM management aim to pay a rising stream of dividends, which WAM Leaders has done so far. It currently has an expected grossed-up dividend yield of 6.27% if it pays another 2.5 cents per share in six months.
Clime Capital Limited (ASX: CAM)
Clime is a much smaller LIC but I think it offers investors a very interesting proposition. It looks to invest in large caps, medium caps, small caps and international equities. This sees the company invest in shares like Ramsay Health Care Limited (ASX: RHC), Credit Corp Group Limited (ASX: CCP), Hansen Technologies Limited (ASX: HSN) and Alphabet (Google).
I like that Clime has increased its dividend each year for the past five years and it currently pays a grossed-up dividend of 8.35%.
I like both of these LICs but neither has quite been appealing enough yet for me to push the buy button. However, Clime looks quite interesting at the current price and it’s likely trading at a discount to its NTA, assuming the NTA hasn’t changed much from the last monthly update.
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Motley Fool contributor Tristan Harrison owns shares of Ramsay Health Care Limited. The Motley Fool Australia owns shares of Hansen Technologies. The Motley Fool Australia has recommended Ramsay Health Care 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 Scott Phillips.
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