WAM Leaders Ltd (ASX: WLE) has cemented its place as a top ASX dividend share after announcing a dividend increase for the FY20 final dividend. The WAM Leaders share price is up 5%.
Overview of WAM Leaders
WAM Leaders is a listed investment company (LIC) that actively invests in large cap ASX shares.
It’s operated by Geoff Wilson’s Wilson Asset Management (WAM) with the lead portfolio manager being Matthew Haupt. It was launched in May 2016.
The full report wasn’t released today, but WAM Leaders announced a number of key aspects about its FY20 result.
The ASX dividend share stated that its investment portfolio had significantly outperformed during FY20. In the 12 months to 30 June 2020 the investment portfolio outperformed the S&P/ASX Accumulation Index by 10.4% with a positive return of 2.7%. The benchmark fell 7.7%.
Since inception in May 2016 the WAM Leaders investment portfolio has increased 10.2% per annum, outperforming the index by 3.7% per annum.
WAM Leaders attributed its investment approach as the reason for the outperformance. It focuses on large companies with “compelling fundamentals, a robust macroeconomic thematic and a catalyst to drive the share price higher”.
A 15% dividend increase
The ASX dividend share’s board has declared a fully franked final dividend of 3.25 cents per share, bringing the FY20 full year dividend to 6.5 cents per share. The FY20 annual dividend is 15% bigger than the FY19 total.
WAM Leaders funds its dividend from the investment profits that it makes. Building up the profit reserve is important to pay for future dividends.
At 30 June 2020 the company had an estimated profit reserve of 15.6 cents per share before the payment of the fully franked final dividend of 3.25 cents per share. This represents 2.4 years of dividend coverage at the current level.
The ASX dividend share’s board said it’s committed to paying an increasing stream of fully franked dividends to shareholders as long as it has sufficient profit reserves, franking credits and it makes sense to do so.
Since inception the LIC has paid 16.9 cents per share in fully franked dividends. It has grown its dividend each year since FY17 when it first started paying a dividend.
Top holdings at 30 June 2020
A LIC’s return is dictated by the performance of its holdings.
At the end of FY20 its biggest holdings, in order, were: National Australia Bank Ltd (ASX: NAB), CSL Limited (ASX: CSL), BHP Group Ltd (ASX: BHP), QBE Insurance Group Ltd (ASX: QBE), Westpac Banking Corp (ASX: WBC), Commonwealth Bank of Australia (ASX: CBA), Santos Ltd (ASX: STO), Woolworths Group Ltd (ASX: WOW), Wesfarmers Ltd (ASX: WES), Australia and New Zealand Banking Group (ASX: ANZ), Telstra Corporation Ltd (ASX: TLS) Rio Tinto Limited (ASX: RIO), Star Entertainment Group Ltd (ASX: SGR), Downer EDI Limited (ASX: DOW) and Transurban Group (ASX: TCL).
Many of the above names are similar to the biggest names on the ASX. It may be noteworthy that NAB is the biggest holding whilst the ANZ position is smaller than Wesfarmers and Woolworths. Star and Downer are two other interesting investments that aren’t in the ASX 20.
The ASX dividend share has been an impressive performer during FY20. Plenty of WAM Leaders’ positions that I mentioned above probably won’t be giving shareholders a dividend increase due to COVID-19. So I think it’s impressive that WAM Leaders is increasing the income for shareholders.
At the current WAM Leaders share price of $1.14 it offers a grossed-up dividend yield of 8.1%.
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Transurban Group and Wesfarmers 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.