WAM Global (ASX:WGB) share price jumps on dividend guidance

The WAM Global Ltd (ASX:WGB) share price is storming higher today after providing guidance for its dividend in FY 2021…

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The market may be tumbling lower today but the same cannot be said for the WAM Global Ltd (ASX: WGB) share price.

In afternoon trade the fund manager’s shares are up 5.5% to a record high of $2.41.

Why is the WAM Global share price at a record high?

Investors have been buying the company’s shares following the release of a positive announcement this morning.

That announcement revealed that its global investment fund has been outperforming the MSCI World Index in 2020.

According to the release, at the end of November, the WGB Investment Portfolio had delivered a return of 14.6% in the current financial year.

This compares to a 10.3% return by the MSCI World Index, which represents an outperformance of 4.3% for WAM Global.

What does this mean for dividends?

A lot of investors look to WAM Global and its other funds for a source of income. This is due to their traditionally very generous payouts.

The good news for investors is that FY 2021 will be no different.

The release advises that the WAM Global board intends to pay shareholders a fully franked interim dividend of 5 cents per share. This represents a 66.7% increase on FY 2020’s interim dividend.

If you were to annualise this interim dividend, it would mean a fully franked full year dividend of 10 cents per share. Which based on the current WAM Global share price, implies a fully franked 4.15% dividend yield.

The release also revealed that the company currently has 41.9 cents per share in profits reserve. This represents 4.2 year of dividend coverage for shareholders.

Management commented: “The dividend guidance has been made possible by the WAM Global investment portfolio’s solid risk-adjusted performance in the financial year to date and the increased profits reserves available.”

“The Board notes the share price is currently trading below the net tangible assets (NTA) and believes the clear dividend guidance and the continued strong performance of the investment portfolio will lift the share price to a premium to NTA over time,” it concluded.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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