Here’s why this LIC could be called one of Australia’s safest dividend shares

Many investors spend a lot on brokerage to create a portfolio that looks remarkably similar to the ASX20. I don’t think this is a very good idea.

Why bother giving a lot of your money to Commsec to buy shares of Commonwealth Bank of Australia (ASX: CBA), Telstra Corporation Ltd (ASX: TLS) and BHP Billiton Limited (ASX: BHP) when you could save hundreds of dollars by buying a listed investment company (LIC) that owns all those shares.

One of the best LICs in the large cap space in my opinion is Whitefield Limited (ASX: WHF). It has been operating since 1923.

Its top holdings are pretty similar to the index with Commonwealth Bank, Westpac Banking Corp (ASX: WBC) and CSL Limited (ASX: CSL) being its three largest holdings.

The main attraction to me about Whitefield is that its dividend has been maintained or increased over the past 20 years. That provides wonderful certainty for people who require a consistent level of income. Plus, the dividend has just been increased after a decade of being at the same level. The grossed-up yield is currently 5.2%.

Over the past five years Whitefield has created a perfectly acceptable return of around 10% when you add the share price and dividend returns together.

The good thing about Whitefield is that it has a very low management cost of around 0.25% per annum. This is a lot cheaper than most other LICs on the market.

Foolish takeaway

It’s probably trading at a discount of around 8% to 10% to its pre-tax NTA at the moment. I think this is useful considering you’re buying the underlying assets at a decent discount. Whitefield could be a good choice for retirees, however for people looking to beat the market I think there are much better share options.

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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 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.

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