WAM Research Limited (ASX: WAX) has reported its FY19 result, is the share price a buy for the 10% grossed-up dividend yield?
WAM Research is the listed investment company (LIC) in the Wilson Asset Management stable that purely focuses on the quality of the underlying businesses that it invests in.
Over the past five years the WAM Research portfolio has delivered an average return per annum of 14.8% before fees, taxes and expenses, outperforming the S&P / ASX All Ordinaries Accumulation Index by 5.8%.
However, it was a tough FY19 with the WAM Research portfolio only returning 1.8% before fees, expenses and tax, underperforming the index by 9.2% which returned 11% on the back of a strong performance by the blue chips – particularly the miners.
In terms of the profit generated for FY19, WAM Research made an operating profit before tax of $0.4 million and an operating profit after tax of $1.6 million.
There has been a divergence between the performance of large caps and small caps recently, perhaps somewhat driven by index investing into larger caps, which excludes those smaller businesses which WAM Research generally focuses on.
Some of the best performers for WAM Research's portfolio this year were shipbuilder Austal Limited (ASX: ASB), plus-sized fashion business City Chic Collective Ltd (ASX: CCX), IT and communications business Service Stream Limited (ASX: SSM), global digital retailer of lotteries Jumbo Interactive Ltd (ASX: JIN) and receivables & specialist financing company Scottish Pacific Group Limited (ASX: SCO).
Foolish takeaway
WAM Research continues to be one of the best LICs on the ASX for income in my opinion, after another year of increasing the dividend, which went up by 2.1% despite the tough year.
It still had a profit reserve of 32.1 cents per share at 31 July 2019, before the payment of the final dividend. WAM Research offers a grossed-up dividend yield of 10.4% and its premium to the NTA is lower than last year, so I think it could be a decent time to buy for dividends, and I like the focus on protecting capital with a high cash balance.
