One of the main problems for people with capital these days is that it’s very hard to find decent income.
Low interest rates means terrible income from the bank and it’s also pushed up asset prices, reducing the net yield from property and reducing the dividend yield from shares. Most shares with genuine high yields are riskier than most.
That’s why listed investment companies (LIC) are so attractive – the company structure means they can pay out capital gains & income received out as dividends to shareholders in a controlled way.
Here are three LICs with big yields:
Clime Capital Limited (ASX: CAM)
Clime is a small LIC, but I like its strategy. It invests in ASX large caps, medium caps, small caps and international shares. Some of its top holdings include Webjet Limited (ASX: WEB), Afterpay Touch Group Ltd (ASX: APT), Collins Foods Ltd (ASX: CKF), Facebook and Alphabet.
It has an attractive quarterly dividend and currently offers a grossed-up dividend yield of 7.8% and has increased its dividend each year over the past five years.
WAM Capital Limited (ASX: WAM)
WAM Capital is the leading LIC run by Wilson Asset Management. Since inception in August 1999 its portfolio has delivered an average return per annum of 17.5% before fees and expenses.
Whilst the returns have somewhat slowed due to size, it is still averaging mid-teen returns over the last few years. It has kept a lot of cash on hand during this time as well, which provides safety and opportunity in tough times.
It has increased its dividend each year since the GFC and currently has a grossed-up dividend yield of 9%.
Australian United Investment Company Ltd (ASX: AUI)
This LIC has been going for over 50 years and has maintained or grown its dividend every year for the past 25 years. However, the dividend growth could be described as slow-and-steady.
It has ridden the wave of Australia’s unbroken economic growth thanks to Australia’s blue chips like Commonwealth Bank of Australia (ASX: CBA) and Wesfarmers Ltd (ASX: WES) being consistent performers.
It currently has a grossed-up dividend yield of 6%.
All three LICs have yields that offer income at least twice as good as the best bank interest in Australia. Whilst the WAM Capital premium is daunting, the yield is the most attractive and that’s the one I’d pick purely for income. However, it might offer a better yield in a couple of months after the dividend has been paid.
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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 Wesfarmers Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Collins Foods Limited and Webjet Ltd. 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.