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WAM Capital Limited (ASX:WAM) grows profit by 88% in FY18 report

WAM Capital Limited (ASX: WAM) is the largest and oldest listed investment company (LIC) in the Wilson Asset Management (WAM) stable.

Today, WAM Capital revealed a record operating profit before tax of $166.9 million, representing an 87.6% increase compared to the FY17 result.

The key statistic that I’m sure readers want to know is that the FY18 dividends declared were a total of 15.5 cents per share, which represented an increase of 3.3%.

WAM Capital’s portfolio produced a return of 15% before expenses and fees, compared to the S&P/ASX All Ordinaries Accumulation Index’s return of 13.7%. This outperformance was achieved with an average cash weighting of nearly 30%.

The before-tax NTA increased by 12% during FY18, including the 15.25 cents per share of dividends paid to shareholders. The NTA increase includes the 2.5% paid for corporate tax, 1% of management fees and other items.

WAM Capital’s total shareholder return was 6.1% which was driven by the portfolio performance but hampered by the reduction in the premium to the NTA which fell from 22.6% in 2017 to 17.2% at the end of FY18.

Three of the LIC’s best performing holdings were Seven Group Holdings Ltd (ASX: SVW), Nine Entertainment Co Holdings Ltd (ASX: NEC) and Afterpay Touch Group Ltd (ASX: APT)

At 30 June 2018, WAM Capital’s four largest holdings were Nine Entertainment, Pengana International Equities Ltd (ASX: PIA), Aveo Group (ASX: AOG) and Templeton Growth Fund Ltd (ASX: TGG).

The WAM Capital team remain cautious with the rise in global interest rates, coupled with the potential of trade wars. Although global economic growth continues, WAM believes volatility will increase. WAM Capital started FY19 with 29% of the portfolio in cash.

Foolish takeaway

WAM Capital currently has a grossed-up dividend yield of 8.9% and it has increased its dividend each year since the GFC – an excellent record. I believe WAM Capital is one of the attractive dividend shares on the ASX.

However, if you’re looking to buy shares you may achieve a better purchase price (and starting yield) after the final dividend has been paid in a couple of months. The current 24% premium to July 2018’s pre-tax NTA is quite expensive.

Instead, a more attractively-priced dividend share could be this top ASX stock for your portfolio which is likely to grow its dividend by more than 25% in FY18.

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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 AFTERPAY T FPO. 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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