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Whitefield Limited (ASX:WHF) reports, should you buy for its 5.5% yield?

Credit: GotCredit

Whitefield Limited (ASX: WHF) has reported its annual result for the 12 months to 31 March 2018. Whitefield is one of the oldest listed investment companies (LICs) on the ASX having operated since 1923.

I really like the LIC because it has a long-term focus and it has a good reputation for maintaining or increasing the dividend over the ultra-long-term, indeed the dividend hasn’t declined over the past 20 years.

Today, the company announced that it was increasing its final dividend by 5.9% to 9 cents per share from 8.5 cents compared to the previous year. The company said that its operating earnings per share (EPS) increased by 5.3% this year to 17.79 cents per share.

The LIC attributed the operating result to increased distributions from some of its major positions like Cimic Group Ltd (ASX: CIM), Transurban Group (ASX: TCL), Insurance Australia Group Ltd (ASX: IAG) and Macquarie Group Ltd (ASX: MQG).

Whitefield was pleased to say that its operating expenses to assets amounted to 0.4%, which is quite cheap compared to most other LICs.

The LIC said that over the past five years its portfolio return stood at 9.07% per annum, which beats the company’s benchmark, the ASX200 Industrials Accumulation Index return of 8.81% per annum.

Its net asset backing was $4.79 at 31 March 2018 compared to $5.08 one year ago, which is a fall of around 6%, before accounting for the payment of dividends.

Foolish takeaway

Whitefield is currently trading with a grossed-up dividend yield of 5.5%. I like that Whitefield has a large profit reserve, it can pay many years of dividends at the current level. However, I’m wary of Whitefield shares at the moment due to the heavily indebted nature of Australian households, which could have a knock-on effect to Whitefield’s biggest holdings.

Instead, if I were investing for dividends, I'd much rather invest in this top income stock which just grew its dividend by more than 25%.

Breaking news: ASX companies set to raise dividends!

It's been a nail-biter of a reporting season here in the first half of 2018.

But the real action, in my opinion, is what companies are doing with dividends.

What does this mean for you? Well there is one stock I've found that could very well turn out to be THE best buy of 2018. And while there's no such thing as a 'sure thing' when it comes to investing - this ripper might come as close as I've ever seen.

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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 and has recommended Transurban Group. The Motley Fool Australia owns shares of Insurance Australia Group 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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