One of the most beneficial things about the listed investment company (LIC) structure is that it allows the LIC to pay out large dividends out from both the income received and capital gains.
I think one of the best small cap fund managers on the ASX is NAOS Asset Management, which operates three different LICs with very high dividend yields. Are they buys today?
NAOS Small Cap Opportunities Company Ltd (ASX: NSC)
NAOS Small Cap Opportunities Company looks at shares that are worth between $100 million to $1 billion.
Based on the 31 March 2019 figures, Naos outlined that NSC has a fully franked dividend yield of 8.8%, or 12.6% including the franking credits.
An attractive reason why the yield is so high is that it was trading at a 16.67% discount to the pre-tax net tangible assets (NTA), meaning you can buy the underlying businesses at a sizeable discount.
The last 12 months has been tough for some of NSC’s largest holdings like MNF Group Ltd (ASX: MNF), but the rest of 2019 could be a turnaround story.
Naos Emerging Opportunities Company Ltd (ASX: NCC)
Naos Emerging Opportunities Company looks at shares that are worth between $10 million to $250 million.
Based on the 31 March 2019 figures, Naos outlined that this LIC has a fully franked dividend yield of 6.7%, or 9.6% including the franking credits.
The share price is close to the NTA of Naos Emerging Opportunities Company, it’s not at a bargain price. But, the smallest shares might have the biggest returns potential over the long term.
NAOS Ex-50 Opportunities Company Ltd (ASX: NAC)
NAOS Ex-50 Opportunities Company looks at shares worth between $400 million and $6.5 billion, or ones outside of the ASX50.
Based on the 31 March 2019 figures, Naos outlined that this LIC has a fully franked dividend yield of 6.2%, or 8.85% including the franking credits.
At the end of March 2019 it was valued at a 16% discount to its NTA, so it’s also looking cheap right now.
Which One Is Best?
I like the concept of Naos Emerging Opportunities Company the most, but the other two seem to be trading at better values. I like the look of NSC the best because it has the largest dividend yield and is invested in reasonably well-known and long-running businesses that still have plenty of growth potential.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Disclosure: Jaz owns shares of NAOS Small Cap Opportunities Company Ltd at the time of writing, although this could change at any time.