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Is the WAM Research Limited (ASX:WAX) share price a buy?

The WAM Research Limited (ASX: WAX) share price has fallen significantly since it went ex-dividend a few days ago. This is partly to be expected, as it does this every six months.

However, the share price has fallen a lot harder than the actual dividend amount would reduce the net tangible assets (NTA) per share.

I think it’s now worth asking if it’s a buy again. WAM Research has been one of the best-performing listed investment companies (LICs) on the ASX since the GFC. Its total return and dividend payments have been very good over the past decade.

It has increased its dividend each year since the GFC. There are few shares on the ASX which have such an impressive and reliable dividend record.

Over the past seven years its portfolio has returned an average of 20% per annum before fees and expenses, outperforming the S&P/ASX All Ordinaries Accumulation Index by 8.8% per annum. It’s this type of long-term record which makes me think that every dividend investor should be interested in WAM Research.

WAM Research’s ability to choose small to mid-cap shares that have good growth potential and are undervalued is a key part of the strong returns. Otherwise, the investment team are happy to sit in cash, which is why 21.1% of the portfolio was cash at the end of September 2018.

Is it a buy?

It’s now trading at ‘only’ a 20% discount to the pre-tax NTA declared at the end of September 2018 after taking into account the dividend. Whilst this is still a hefty premium, it is at a better valuation than a 30% premium just a week ago. I recently took advantage of that to sell my WAM Research shares.

Its current grossed-up dividend yield of 8.8% is much more attractive for the next 12 months. Indeed, it’s probably higher considering WAM Research will probably increase the dividend again in a few months. The WAM Research share price may get even cheaper over the next few weeks.

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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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