MENU

This LIC has a huge 8.5% dividend yield

Credit: GotCredit

NAOS Ex-50 Opportunities Company Ltd (ASX: NAC) has a huge grossed-up dividend yield of 8.5%. Is it worth buying?

It’s a listed investment company (LIC) that aims to invest in mid-cap shares that are outside of the ASX 50, generally with market capitalisations of between $400 million to more than $1 billion.

Some of the biggest shares on the ASX are definitely not the best to own for growth, like Australia and New Zealand Banking Group (ASX: ANZ) and Telstra Corporation Ltd (ASX: TLS).

I really like some of its holdings including Reece Ltd (ASX: REH) and MNF Group Ltd (ASX: MNF). These are quality businesses with long-term prospects and international growth potential.

Naos likes to hold a smaller number of high-conviction ideas. Why hold your 40th best idea? At the end of October 2018, it had 13 long positions. I like that the holdings completely ignore the index.

Since inception in November 2014 its portfolio has returned an average of 12.07% before fees but after expenses, it has outperformed the S&P/ASX 300 Industrials Accumulation Index by an average of 6% per year in this time.

The dividend has increased every year since FY15, it’s nice to receive a growing stream of dividends in this era of low interest rates, particularly with a grossed-up dividend yield of 8.5%. As long as Naos can continue to generate double-digit long-term returns then the dividend should be able to keep growing.

Foolish takeaway

At the end of last month it had a pre-tax NTA of around $1 and the shares are currently trading at $0.91, so it’s likely trading at a decent discount to its underlying value.

However, with a higher management fee than its sibling Naos LICs, I would prefer to invest in Naos Emerging Opportunities Company Ltd (ASX: NCC) or NAOS Small Cap Opportunities Company Ltd (ASX: NSC) at the current prices.

If your goal is income then these top shares could generate the dividends that you want from your portfolio.

NEW! Top 3 Dividend Bets for 2019

With interest rates likely to stay at rock bottom for months (or YEARS) to come, income-minded investors have nowhere to turn... except dividend shares. That’s why The Motley Fool’s top analysts have just prepared a brand-new report, laying out their top 3 dividend bets for 2019.

Hint: These are 3 shares you’ve probably never come across before.

They’re not the banks. Not Woolies or Wesfarmers or any of the “usual suspects.”

We think these 3 shares offer solid growth prospects over the next 12 months. The first two currently offer fat, fully franked yields. The last is a surprising REIT offering you the benefits of being a landlord with none of the hassle! You’ll discover all three names and codes in "The Motley Fool’s Top 3 Dividend Shares for 2019."

Even better, your copy is free when you click the link below. Fair warning: This report is brand new and may not be available forever. Click the link below to be among the first investors to get access to this timely, important new research!

The names of these top 3 dividend bets are all included. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies move – we may be forced to remove this report.

Click here to claim your free copy right now!

Motley Fool contributor Tristan Harrison owns shares of NAO SMLCAP FPO. The Motley Fool Australia owns shares of and has recommended MNF Group Limited and Telstra Limited. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.