Wilson Asset Management (or WAM for short) is one of Australia’s biggest ASX investment companies. WAM operates a stable of six listed investment companies (LICs) that cover many different investing strategies and markets. WAM Leaders Ltd (ASX: WLE) is just of of these LICs and offers a healthy dividend and exposure to some of the biggest ASX companies.
A closer look at WAM Leaders
WAM Leaders is a $992.3 million LIC that focuses on “diversified exposure to a portfolio of undervalued growth companies within the S&P/ASX 200 Index and exposure to market mispricing opportunities in large-cap companies.”
So, unlike WAM’s flagship LIC WAM Capital Ltd (ASX: WAM), WAM Leaders shuns small and mid-cap ASX companies and primarily focuses on the big dividend-payers. As such, its current top holdings include blue-chips like Commonwealth Bank of Australia (ASX: CBA), Fortescue Metals Group Ltd (ASX: FMG) and Telstra Corporation Ltd (ASX: TLS).
Because WLE invests in these big dividend-payers, it of course pays a very hefty dividend itself. WAM Leaders will pay a 3 cents per share final dividend on October 25 this year. Annualised, this approximates to a yield (on today’s prices) of around 5.13%, which bumps up to 7.33% when including franking credits.
A Leading LIC?
Even purely as an income stock, WAM Leaders is clearly worth a look. This dividend is higher that what you would expect from an S&P/ASX 200 (INDEXASX: XJO) index fund and is similar to the dividend you would get from an ASX banking stock like Commonwealth Bank. But WLE has also outperformed the ASX 200 index (if you combine growth and income from dividends) since its inception in May 2016.
The current share price is also appealing from a value standpoint. The shares are (at the time of writing) going for a price of $1.18, which is a 6.8% discount to WLE’s net tangible assets (NTA) per share of $1.26 as of 30 June. One of the best things about LICs is the opportunity to pick up assets at a discount – if you buy WLE shares today and they go back to intrinsic value (which is very possible), you are looking at an immediate return.
If you like LICs as an investment vehicle, WAM Leaders would be a good option to consider as a market-beating ASX 200-focused investment with a substantial income stream. The opportunity to pick up shares at an NTA discount is also very appealing, and you could do a lot worse than WAM Leaders for an income-and-some-growth option.
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Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended 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.