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3 reasons why I love this top LIC

I’m always on the lookout for a good listed investment company (LIC) that offers good dividend income, good returns and a reasonable fee structure.

Future Generation Investment Company Ltd (ASX: FGX) is one of my favourite options because it ticks all the boxes in my opinion:

  1. Fees

Future Generation charges no management fees or investment fees, despite investing in the funds of top Australian-focused fund managers such as Paradice and Bennelong.

Instead, it donates 1% of NTA to charities that help the youth. This is a very worthy cause.

So, if the underlying portfolio outperforms the S&P/ASX All Ordinaries Accumulation Index then there aren’t any outperformance fees.

  1. Performance

Over the past year its portfolio grew by 16.4%, outperforming the benchmark by 1.7%. Since inception in September 2014 its portfolio has outperformed the benchmark by an average of 3.1% per annum.

Whilst this isn’t a huge outperformance the differential can turn into a substantial amount of money when compounded over a number of years.

  1. Dividend income

One of Future Generation’s main aims, besides supporting charities, is to provide an increasing stream of fully franked dividends.

Future Generation has increased its dividend each year since 2015 and currently offers a grossed-up dividend yield of 5%.

Share purchase plan

There is a SPP currently going ahead which allows existing shareholders to buy up to $15,000 of shares of Future Generation without the cost of brokerage. Hopefully this can raise a good amount of money which will increase the annual donation pool.

Foolish takeaway

Future Generation is a very worthwhile investment – both for the donations and the investment returns.

I like that it offers a lot of diversification through the underlying funds and hopefully it can keep steadily increasing the dividend over the long-term.

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Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO. 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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