The ASX dividend stock WAM Microcap Ltd (ASX: WMI) has suffered a significant decline in recent times. As the chart below shows, the WAM Microcap share price is down by 37% between 2 November 2026 and early October 2025. I think this is a great time to invest in the business.
WAM Microcap is a listed investment company (LIC) that's operated by Wilson Asset Management. The LIC says that it targets the most exciting undervalued growth opportunities in the Australian microcap market.
I don't usually invest at the smallest end of the market, where there could be great opportunities, so I'm happy to leave the investing to a specialised investment team.
It could be a very appealing time to look at WAM Microcap with how large the dividend yield has become following the large decline. The small-cap end of the market has been volatile this year, making it difficult for the team to produce positive returns.
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Large dividend yield
Investing for passive income is an understandable goal when it comes to buying ASX shares, though it shouldn't be the sole purpose of an investment. The business should be attractive too, not just the dividend yield.
Having said that, WAM Microcap does have a very large dividend yield, and investors can enjoy the large payouts.
Considering a good term deposit rate is currently in the mid-5% range, the WAM Microcap payout looks very attractive.
The business paid an annual dividend per share of 10.7 cents in FY26. That translates into a trailing dividend yield of 9.5% excluding franking credits and 13.5% including franking credits.
Stable payouts
With most businesses with a dividend yield that high, I'd suggest the dividend yield may not be sustainable in the year ahead.
WAM Microcap started paying a dividend in FY18, and it has provided a reliable dividend ever since, though dividends are not guaranteed payments.
It increased its regular annual dividend each year between FY18 and FY23, maintained the payout in FY24, and has since grown its annual dividend per share by around 1% each year.
Considering how large the dividend yield already is, I think a dividend hike of 1% is appealing for shareholders.
In October, it reported in its monthly update that as at 30 September 2026, it had a profit reserve of 49.8 cents per share. Therefore, it has more than four years of profit reserve to cover dividends at the FY26 level. It will need to continue generating investment returns in the long term to maintain and grow the dividend.
The ASX dividend stock trades at an attractive valuation
At the end of September 2026, it had net tangible assets (NTA) per share of $1.18 before the fully-franked dividend per share of 5.35 cents was paid. Therefore, if we minus off the dividend, the NTA per share would have been around $1.125. The current WAM Microcap share price (at the time of writing) is $1.14, only a very slight premium to the September NTA.
At the end of December 2025, it traded at a 7.6% premium to its December 2025 NTA and has traded at a sizeable premium for most of this decade to date.
Therefore, the ASX dividend stock is trading at a much lower NTA-to-share-price than it has historically, and this looks like a good time to invest.
