The S&P/ASX 200 Index (ASX: XJO) is having a good, albeit bumpy, start to the trading week this Monday. At the time of writing, the ASX 200 is up 0.18% to 7,375.6 points after an initial stumble into negative territory soon after open this morning.
But one ASX share isn’t sharing in this positive sentiment today. That would be the WAM Capital Ltd (ASX: WAM) share price.
WAM shares are currently down a nasty 4.58% from Friday’s close to $2.29 a share, at the time of writing. That’s a pretty steep fall for a Listed Investment Company (LIC) not known for its volatility.
So what’s going on with WAM Capital, one of the ASX’s largest LICs, today?
WAM gets an ASX whamming
Well, there has been some movement at the station for WAM today. This morning, Wilson Asset Management (the WAM in WAM Capital) sent shareholders a notice that this LIC has “acquired all the issued capital of an unlisted investment company with net assets of approximately $36.3 million”. No further details were given about this “unlisted investment company”.
This acquisition has been paid for with new WAM Capital shares. The LIC released an ASX notice this morning confirming that 16,678,217 additional shares have been issued.
But $36.3 million is little more than a drop in the ocean for a company with a market capitalisation north of $2 billion.
Don’t worry, it’s probably just a dividend…
Instead, the real culprit for today’s steep drop is likely to be WAM Capital’s upcoming ASX dividend. Yes, WAM shares have today traded ex-dividend for the LIC’s upcoming final dividend payment. WAM Capital will be shelling out 7.75 cents per share, fully franked, on 29 October. But only shareholders who held WAM shares before today will be eligible to receive this payout.
As such, the rough value of this dividend has been drawn out from the WAM Capital share price today, since new shareholders won’t enjoy this benefit. It’s probably the best reason there is to have one of your shares fall in value.
Yes, a ~4% drop is a large one for WAM Capital. But it does reflect the large value of this upcoming payment. On Friday’s closing share price, 7.75 cents per share equates to a yield of 3.14% (or 6.49% annualised). With the value of this LIC’s full franking, these yields gross-up to 4.49% and 9.27% respectively. With such a hefty dividend payment going out the door, it’s no surprise that we see a big drop in the value of WAM Capital shares today.
At WAM Capital’s current share price of $2.29, this ASX LIC has a market capitalisation of $2.02 billion and a dividend yield of 6.74%.