WAM Leaders Ltd (ASX: WLE) just increased its dividend in its FY19 result, is it a buy?
WAM Leaders is a listed investment company (LIC) which invests in the larger businesses on the ASX, The LIC structure allows WAM Leaders to make profit from dividends received and capital gains and then pay a growing stream of fully franked dividends.
WAM Leaders FY19 Result
WAM Leaders reported that it achieved an operating profit after tax of $71.5 million for FY19.
However, there are better measures of performance of an LIC. Over the past year the WAM Leaders investment portfolio grew by 10.9% before expenses fees and taxes, compared to a 11.5% return of the S&P/ASX 200 Accumulation Index.
During the half year the WAM Leaders investment team said that during the period, which included a U-turn by the US Federal Reserve and Chinese stimulus, the portfolio was active.
WAM Leaders invested in infrastructure, gold and real estate investment trusts (REITs) to take advantage of loose monetary policy and spokes in volatility surrounding geopolitical tensions. It also invested in iron ore businesses.
Some of the businesses to help the performance were Fortescue Metals Group Limited (ASX: FMG), BHP Group Ltd (ASX: BHP) and Newcrest Mining Limited (ASX: NCM). Detractors were Origin Energy Ltd (ASX: ORG), James Hardie Industries plc (ASX: JHX) and Nufarm Limited (ASX: NUF).
WAM Leaders FY19 Dividend And Balance Sheet
WAM Leaders’ Board decided to increase the final dividend by 20% to 3 cents per share, bringing the full year dividend to 5.65 cents per share, an increase of 13% for FY19.
At June 2019, WAM Leaders ended with 9.1% of the portfolio of cash ($89.9 million), 92% of the portfolio as shares ($913.5 million) and 1.1% of the portfolio as short picks ($11.1 million).
Is WAM Leaders A Buy?
With the new dividend, WAM Leaders has a fully franked FY19 dividend yield of 4.9%, which looks quite attractive. It was also valued at a discount of 8.1% to its net tangible assets (NTA) at 19 July 2019.
However, WAM Leaders has a cautious outlook about the future due to the domestic economy. So if you wanted to invest in WAM Leaders I would only put part of my money to work for now.
Instead, the reliable and proven businesses in the free report below could be better picks for dividends and growth.
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