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Is WAM Research Limited the best dividend stock on the ASX?

Investors looking for dividend stocks may not need to look any further than WAM Research Limited (ASX: WAX) as the best dividend stock on the ASX.

There are a few different factors that I’d want to know about this listed investment company (LIC) before I invested in it. It’s run by Wilson Asset Management, the same firm that has run WAM Capital Limited (ASX: WAM) for two decades.

Here are some of the key points:


I don’t think any normal business or LIC with a big dividend is worth owning if it isn’t performing. WAM Research’s portfolio has delivered an average return per annum before fees of 15.4% over the last three years and 18% per anum since the change in investment strategy in July 2010.

There are few LICs on the ASX with stronger performance than this. Any dividend stock has to back up a big dividend with growing earnings, even if it is only a little growth. Otherwise you could be getting a big dividend for even bigger capital losses.

The yield

WAM Research pays out a lot of its high performance as a big dividend. There are few shares on the ASX paying out a bigger dividend than WAM Research’s trailing grossed-up yield of 9.05%.

Growth of the dividend

A big dividend is one thing, but if it’s static then over time other shares may end up delivering stronger income in time. This isn’t the case with WAM Research, it has grown its dividend every year since the GFC. In the latest half-year result it grew its dividend by 5.5% from 4.5 cents per share to 4.75% cents per share.

Plus, the LIC has around three years’ of profit reserves at the current dividend level.


The other thing I’d want to know is how safe WAM Research is. I don’t want to risk money just to chase a dividend. The WAM philosophy is to sit in cash unless the investment team can see clear value in what the LICs buy.

That’s why the WAM Research portfolio was 34.7% cash at the end of April 2018. This is good protection against market crashes and gives it good ammunition if it sees any opportunities.

Foolish takeaway

Based on everything I’ve said above, I believe WAM Research is right up there as one of the very best dividend stocks on the ASX. It certainly has an impressive dividend history since the GFC a decade ago. The only drawback to the current share price is the premium to the NTA that it’s currently trading at.

If the large premium to NTA scares you off WAM Research then this top income stock could be a better option, it just grew its dividend by more than 25%.

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

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Motley Fool contributor Tristan Harrison owns shares of WAM Research 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 Scott Phillips.

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