I think it’s getting increasingly hard to find reliable dividend stocks these days. The ones with big yields seem to be the ones most at risk, just look at Telstra Corporation Ltd (ASX: TLS).
With that in mind, I think listed investment companies (LICs) could provide the answer that income seekers are looking for. They generally provide good, growing income because they own a diverse portfolio of stocks and pay out most of the profit as a dividend.
With that in mind, here are three LICs with big dividends:
Clime Capital Limited (ASX: CAM)
Clime is currently trading with a grossed-up dividend yield of 8.4%.
I like Clime because it offers investors a diverse portfolio of shares with Aussie large caps, medium caps, small caps as well as international shares. This diversification allows Clime to find the best shares from any market segment it thinks is good value.
For the financial year to date Clime’s portfolio has returned 8% net of fees. This isn’t a huge return, but I like the shares it’s buying and its dividend is slowly growing.
WAM Research Limited (ASX: WAX)
WAM Research is currently trading with a grossed-up dividend yield of 9.17%.
This is my favourite LIC of the WAM LICs. It purely looks at the quality of the business and only goes for undervalued growth companies where it sees a catalyst to increase the valuation. Otherwise, the LIC sticks to cash – which is a safe yet very effective way of operating.
It has grown its dividend every year since the GFC and its portfolio has grown by 12.3% over the past year before fees.
NAOS Absolute Opportunities Co Ltd (ASX: NAC)
NAOS Absolute Opportunities Co is trading with a grossed-up dividend yield of 7.78%.
This LIC is run by Naos Asset Management. It looks to buy industrial companies with market caps between $400 million and $1 billion. It has grown its dividend each year since it started paying one in the second half of FY15 and its portfolio has grown by 10.18% before fees over the past year.
I believe all three LICs will continue to generate pleasing income for shareholders, however I think WAM Research would be the best choice for dividends because it is currently yielding over 9% and has a proven long-term track record of outperforming the market.
If the WAM Research NTA scares you off, then this top dividend stock could be a better choice because it’s trading with a PEG ratio of under 1 and just grew its dividend by more than 25%.
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Motley Fool contributor Tristan Harrison owns shares of WAM Research Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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.