I love owning ASX dividend stocks that can provide investors with a reliable dividend.
Dividends are a wonderful form of return because they're real cash paid into our bank accounts, and passive income can be much more consistent than capital gains.
The investment I want to highlight today is the listed investment company (LIC) WAM Microcap Ltd (ASX: WMI). With $1,000, an investor could buy 685 shares of this business.
As the name suggests it aims to invest in the most exciting ASX small-cap shares. For multiple reasons, I think the business is an excellent ASX dividend stock to own.
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Strong investment performance
Any company needs to make a profit before it can pay a dividend. LICs make a profit by generating investment returns with their share portfolios.
The WAM Microcap team have proven very effective at investing in small, undervalued businesses to deliver strong returns.
Past performance is not a guarantee of future returns, of course. But, WAM Microcap has returned an average of 14.4% per year since its inception in June 2017, before fees, expenses and taxes. That performance was more than double the return of its benchmark, the S&P/ASX Small Ordinaries Accumulation Index (ASX: XSOA).
By targeting small ASX stocks with a compelling future, WAM Microcap owns a portfolio of exciting names that could grow earnings significantly over the next few years. Additionally, many of those ASX shares may be undervalued relative to their growth potential because they are under-researched.
Pleasing dividends
The business has been very consistent in its dividend payments to investors, funded by its strong investment returns.
WAM Microcap's annual dividend has been increased almost every year since FY18, it has given investors eight years of dividend consistency. That's one of the main reasons why I think it's a reliable ASX dividend stock. The only year it didn't hike its annual dividend was FY24, when it maintained the dividend.
In FY26, the business expects to hike its annual dividend per share by 1% to 10.7 cents per share, representing a grossed-up dividend yield of 10.4%, including franking credits.
Large profit reserve
I think WAM Microcap's dividend is likely to remain resilient and potentially grow slightly each year thanks to the impressive profit reserve (of investment returns generated in previous years).
According to WAM Microcap, it had a profit reserve of 49.8 cents per share at the end of June 2026. That means it can pay close to five years of dividends at the current level.
In my view, WAM Microcap is an attractive and reliable ASX dividend stock I plan to own for dividends for years, though it's not the only business I'd buy today.
