ASX dividend shares can provide you with a good source of income. There are some options out there with large dividend yields that can pay you a lot of cash each year.
Money in the bank isn’t going to earn much interest these days with the official RBA interest rate at just 0.25%.
Here are three ASX dividend shares with very large income yields:
NAOS Small Cap Opportunities Company Ltd (ASX: NSC)
This is a listed investment company (LIC) which targets small caps in a range of between $100 million to $1 billion.
The ASX dividend share owns a high-conviction portfolio of shares with a weighted average market cap of $182.7 million. Some of its investments include MNF Group Ltd (ASX: MNF), Consolidated Operations Group Ltd (ASX: COG) and BSA Limited (ASX: BSA). At the end of June 2020 it had 12 positions.
FY20 was a strange year, which included the COVID-19 market selloff. Its portfolio delivered a return of 2.59% (before fees), outperforming the S&P/ASX Small Ordinaries Accumulation Index’s decline of 5.67% by 8.26%.
At the current NAOS Small Cap Opportunities share price, it offers a grossed-up dividend yield of 11.7%. That’s great for a ASX dividend share. It’s also trading at a 28% discount to the net tangible assets (NTA) at 30 June 2020.
Pacific Current Group Ltd (ASX: PAC)
Pacific is a global asset management business which partners with other investment managers. It helps those investment managers grow. It has a portfolio of 15 specialist boutiques in Australia, India, Luxembourg, the US and the UK.
The company said in its FY20 third quarter update it’s expecting FY20 underlying net profit to be in the range of $23 million to $25 million. That was before the impressive run of the share market since the start of May 2020.
If the ASX share just maintains its dividend in FY20 it will pay investors an annual dividend of $0.25 cents per share. That would amount to a grossed-up dividend yield of 6.4%.
But there’s a fair chance that the ASX dividend share may pay a larger dividend considering the performance of markets over the past few months.
WAM Microcap Limited (ASX: WMI)
I think WAM Microcap could be a top ASX dividend share for many years to come.
It’s a listed investment company (LIC) which targets ASX shares with market capitalisations under $300 million. These businesses could be some of the best growth share opportunities. Not many investors go searching in the small cap zone, so these shares are usually trading at a more attractive valuation compared to their mid-cap counterparts.
The benefit of a LIC is that it can turn investment returns, including capital gains, into a dividend for its own shareholders. That means WAM Microcap can profit from growth shares and then pay its shareholders a dividend.
The ASX dividend share has only been around since June 2017, but it has already been an exciting dividend payer with special dividends in FY18 and FY19. It started paying a dividend in FY18, grew it in FY19 and seems on course to grow it again in FY20.
In FY20 the LIC’s gross portfolio return (before fees, expenses and taxes) was 11.8%, outperforming the S&P/ASX Small Ordinaries Accumulation Index by 17.5%. That’s a very strong outperformance over one year.
At the current WAM Microcap share price, it’s trading with a FY20 grossed-up dividend yield of 6.25%.
I think each of these ASX dividend shares have great income potential. For dividends I think WAM Microcap could be the best option over the long-term, but the Naos LIC does look very good value at the moment and it has a huge yield.
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Tristan Harrison owns shares of NAO SMLCAP FPO and WAM MICRO FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Objective Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends FINEOS Holdings plc. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia has recommended FINEOS Holdings plc and REDBUBBLE FPO. 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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