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Why this LIC could be a good idea for a retiree’s cashflow

NAOS Ex-50 Opportunities Company Ltd (ASX: NAC) is a listed investment company (LIC) that looks to invest in relatively small businesses on the ASX. Its target range is businesses worth between $400 million to around $1 billion.

It has a bias towards industrial businesses and looks to keep a concentrated portfolio of high-conviction ideas. At the end of June 2018 it had 11 holdings and 6.63% of the portfolio was cash.

Over the past three years its portfolio has generated an average return of 15.25% per annum before fees, which is a solid performance.

The LIC has also proposed to amend the benchmark to the S&P/ASX 300 Industrials Accumulation Index, which is a good move for shareholders.

Why it could be good for cashflow

The LIC aims to pay a sustainable growing fully franked dividend each year. It has increased the dividend each year since it started paying in the second half of FY15.

The company currently has a projected grossed-up dividend yield of 8.3% for FY18. This alone is an attractive yield, particularly as the LIC is trading at a 13% discount to the post tax NTA.

However, Naos just announced the proposed dates that it will pay a quarterly dividend. It is aiming to pay quarterly in November 2018, March 2018, June 2018 and then September 2018 which would then appear to bring it into a regular quarterly cycle.

Quarterly dividends even out the cash flow and a payment in June is a good idea as very few businesses on the ASX pay a dividend or distribution in that month. I like the changes that Naos has announced.

As long as NAOS Ex-50 Opportunities Company’s net return after fees outperforms the ASX index and it continues to pay a growing dividend then it could be a good choice for a retiree’s portfolio over the long-term.

Another exciting option for dividends and cash flow is this top share which is on course to reveal another great result in FY18 and could increase 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.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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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