The WAM Leaders Ltd (ASX: WLE) share price offers a large dividend for investors after announcing its FY21 dividend.
WAM Leaders FY21 result
WAM Leaders is one of the first businesses to announce its FY21 numbers.
It said that it achieved a record operating profit before tax of $318.1 million, up from a loss of $1.2 million in FY20. WAM Leaders also said its FY21 operating profit after tax was $228.9 million, up from $5.3 million.
However, listed investment companies (LICs) can see large swings in their accounting profits because of the valuation changes of the portfolios year to year.
In percentage terms, the WAM Leaders portfolio delivered a gross return of 37% (before expenses, fees and taxes). That was 9.2% stronger than the return of the S&P/ASX 200 Accumulation Index return of 27.8%.
WAM Leaders has also outperformed the index over the longer-term. Over the last three years its portfolio gross returns have been an average of 16% per year, an outperformance of 6.4% per year.
Since inception in May 2016, its portfolio has returned an average of 14.9% per year, an outperformance of 4.5% per year.
Of course, there are management fees and outperformance fees charged, so the returns after fees are not quite as high as the gross number.
However, in total shareholder return (TSR) terms (share price plus dividends), the TSR was 58.6% over the 12 months to 30 June 2021.
Dividend
WAM Leaders announced that it increased its total FY21 dividend by 7.7% to 7 cents per share. The final dividend was 3.5 cents per share.
The LIC said the dividend increase was achieved through the strong performance of the investment portfolio.
Entitlement offer
The WAM Leaders board is offering investors the opportunity to increase their interest in the LIC with a pro-rata 1 for 5 non-renounceable entitlement offer at a price of $1.44. That’s the price of the net tangible assets (NTA – the underlying value) at 30 June 2021.
WAM Leaders dividend yield and share price
Based on the share price of $1.56 and the FY21 dividend of $0.07 per share, that means it offers a fully franked dividend yield of 4.5%. For people who take up the entitlement offer, it’s a fully franked yield of more than 4.8%.
If I were already a shareholder and I wanted more exposure, I’d be willing to take that offer up. For dividends, I think it’s a solid option. But with the market share price at a premium to the pre-tax NTA at June 2021, I’d be happy to wait for better value (either a lower price or perhaps a NTA discount) if thinking about total returns for new investors.
