Most of us will know, or even own some of the largest LICs in Australia – like Australian Foundation Investment Co.Ltd (ASX: AFI) and Argo Investments Limited (ASX: ARG).
With every year that passes, there are more of these vehicles listed on the market and it's becoming a bit overwhelming.
We're spoilt for choice and it's hard to know which companies are actually worth our investment dollar. Here are two LICs that are less well-known, but I think have proven their worth over the long-term…
Carlton Investments Limited (ASX: CIN)
An unusual investment company, Carlton Investments owns a portfolio of 75 dividend-paying stocks, along with a very large position in Event Hospitality and Entertainment Ltd (ASX: EVT). The position in Event makes up around 44% of the portfolio.
The company regularly trades at a discount to its NTA (net portfolio value per-share) – often over 10%, which helps to mitigate the concentration risk.
The total return over the last 10 years has been 11.5% per annum, eclipsing most other LICs, due to its large holding in Event. Better than that, over the last 15 years, Carlton has increased its dividend by 8.3% per annum.
The management fee is a rock-bottom 0.08% per annum and its Chairman, Alan Rydge, has a very substantial shareholding and is also the Chairman of Event Hospitality. Carlton currently trades on a yield of around 3.5%, or 5% grossed-up.
Diversified United Investment Limited (ASX: DUI)
This LIC has been listed since 1992 and is a quiet achiever. The company invests in a diversified group of Aussie dividend-paying shares, as well as a few international ETFs – which make up over 10% of the portfolio.
DUI has provided total returns which are slightly ahead of the market and a solid growing dividend. The company has never cut its dividend, and over the last 20 years, the company has increased its dividend by 5.4% per annum.
It also regularly trades at a discount to its NTA – usually up to 5%. DUI currently trades on a yield of 3.5%, or 5% grossed-up.
Foolish takeaway
Both companies are not as popular as the big LICs and that could provide an opportunity for investors who like buying assets at a discount. I think both of these companies are worth considering for a reliable and growing stream of fully-franked dividends.
