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Is this the best LIC on the ASX for retirement income?

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 September 2018 it had 12 holdings and 7.2% of the portfolio was cash. I like the strategy of only investing in shares you really believe are good ideas.

Over the past three years its portfolio has delivered an average return per annum of 16.76% after expenses, but before fees. There are few investment managers that have generated as strong of a gross performance as this over the past three years on the ASX.

Some of its current key investments include Reece Ltd (ASX: REH) and Helloworld Travel Ltd (ASX: HLO), both of which I think have good growth potential.

A key reason to consider this Naos LIC is that it aims to pay out a steadily-growing dividend. It has indeed paid out a growing dividend since the second half of FY15. It has recently switched to paying dividends quarterly, which should help shareholders’ cashflow.

It currently has a grossed-up dividend yield of 7.6%.

Some investors may not like the fees compared to some of the old LICs, however its benchmark was recently changed to the more relevant S&P/ASX 300 Industrials Accumulation Index.

Foolish takeaway

Based on the just-announced September 2018 NTA update, it’s trading at a sizeable 10.6% (or perhaps slightly more now) discount to the pre-tax NTA. Investors focused just on income could consider this LIC as part of a portfolio of dividend shares.

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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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