When an ASX dividend share has a fully-franked 6% dividend yield on the table, it's normally enough for most income investors to take a second look.
At all, a 6% dividend yield, especially one with full franking credits, isn't too common a sight on the ASX. To illustrate, not one of the dividend-heavy big four banks currently offers a yield over 5.7% right now.
Yet that's what the listed investment company (LIC) WAM Global Ltd (ASX: WGB) currently has on the table.
WAM Global is a LIC that is run by Wilson Asset Management. It attempts to invest in a portfolio of globally sourced "compelling undervalued growth companies" on behalf of its shareholders.
This 6% dividend yield comes from the company's last two dividend payments. These were the October final dividend of 5.5 cents per share, and the May interim dividend, also worth 5.5 cents per share. That total of 11 cents per share in 2022 was an increase over the 10 cents per share investors enjoyed in 2021.
Yet I'm not buying this company. In fact, I'm not even tempted. Here's why.
Why I wouldn't buy WAM Global, even with a 6% dividend yield
There are two main reasons. The first is performance. WAM Global first IPO-ed back in mid-2018, for a price of $2.20 per share. Today, almost five years later, the company's share price remains well below its IPO price, at $1.82 at market close on Friday. That's a capital loss of more than 16%:
According to Wilson Asset Management, the company's underlying portfolio has delivered an average of 4.9% per annum (as of 31 December 2022) since IPO. But that doesn't help the capital returns investors have actually enjoyed from their shares.
That figure also doesn't include WAM Global's fee, which is the second reason.
WAM Global charges an annual management fee of 1.25%, plus a performance fee. That's well on the higher end of what managed investments typically charge on the ASX.
By comparison, the Vanguard Australian Shares Index ETF (ASX: VAS) index fund has a fee 12.5 times cheaper than WAM Global at 0.1% per annum. Yet it's vastly outperformed this LIC over its lifetime.
So I'll be saying no to WAM Global's 6% dividend yield. A big yield doesn't mean much when your capital base has been eaten away by lacklustre performance and fees.
