WAM Leaders share price rises on record year and dividend boost

It was a strong year for this listed investment company, with a record dividend.

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Key points

  • WAM Leaders managed to deliver record investment outperformance in FY22
  • The gross portfolio return was 16.2% better than the S&P/ASX 200 Accumulation Index
  • The LIC grew its annual dividend by 14.3%

The WAM Leaders Ltd (ASX: WLE) share price is up more than 1% after the listed investment company (LIC) revealed its FY22 result which included a record dividend.

In early trading, the WAM Leaders share price rose 1.32% to $1.54 and remains there at the time of writing.

Let's check the highlights of the company's results:

WAM Leaders share price higher on record year

  • The gross portfolio return was 9.7% in FY22, outperforming the S&P/ASX 200 Accumulation Index (ASX: XJOA) by a record of 16.2%
  • Operating net profit after tax (NPAT) of $65.8 million, down from $228.9 million in FY21
  • Annual dividend of 8 cents per share, up 14.3% year on year
  • Profit reserve of 36.3 cents

An LIC earns profit from the dividends and capital gains (both realised and unrealised) from its portfolio. In other words, if the portfolio goes up $60 million in value over the financial year, then WAM Leaders can report that as a profit. If the portfolio goes down in value, it leads to a loss in the accounts.

The operating profit was lower than last year and the investment return was also lower. But, it beat the index in percentage terms by a record amount.

What happened during FY22?

There was much volatility for the ASX 200 during the last financial year as inflation soared and central banks started rapidly hiking interest rates in a bid to get things under control.

The WAM Leaders Chair Geoff Wilson said the investment team had an "exceptional" year and that during this volatile period, the fund managers outperformed by "dynamically managing the investment portfolio with continuous adjustments to reflect changes to the economic and market conditions".

In June 2022, WAM Leaders announced it was going to merge with the much smaller Absolute Equity Performance Fund Ltd (ASX: AEG). This acquisition will be paid for in new WAM Leaders shares. The number of shares will depend on a formula based on the ratio of the net tangible assets (NTA) of WAM Leaders before tax, compared to the pre-tax NTA of Absolute Equity Performance Fund.

The WAM Leaders share price fell 4% on the day of the merger news but the ASX 200 also fell by 3.5%, amid heightened volatility for the ASX share market.

What did management say about the performance and the outlook?

Lead portfolio manager of WAM Leaders Matthew Haupt said:

We are pleased to have generated both outperformance, as well as strong absolute investment portfolio performance for our shareholders since inception.

Despite market extremes, both troughs and excesses, our process has generated outperformance well in excess of the market. Currently we are in the midst of a tightening cycle, as central banks navigate between economic growth and inflation.

We welcome periods of uncertainty and volatility, and expect inflection points over the coming year will present further opportunities for our shareholders

What's next?

The LIC's investment team will hold a webinar on 8 September to talk about the result.

WAM Leaders' final dividend will go ex-dividend on 17 November 2022, with the payment due on 30 November 2022.

WAM Leaders share price snapshot

As mentioned, WAM Leaders outperformed its benchmark in FY22.

Over the last month, the WAM Leaders share price has risen by another 4.4%. At the current WAM Leaders valuation, it has a grossed-up dividend yield of 7.4%.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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