ASX dividend shares are great ideas for investors seeking long-term income from the stock market.
The two companies I’m going to talk about today are listed investment companies (LICs) – their job is to invest in other businesses on behalf of shareholders.
They can provide an appealing combination of a good dividend yield and possible capital growth, depending on how their investment portfolios perform.
WAM Microcap Ltd (ASX: WMI)
This LIC targets small ASX shares, which many other investors typically don’t look at. There are good opportunities in that part of the market, if investors know where to look. It can take a lot of research to choose the right small caps, so I’m happy to delegate the investing to the WAM team.
In my opinion, small businesses generally have a lot more growth potential than big companies because they are at an earlier point in their growth.
Between June 2017 and March 2024, the WAM Microcap portfolio achieved an average return per year of 16.4% (before management and performance fees). This has allowed the ASX dividend share to pay a large dividend over the last several years.
At the current WAM Microcap share price, it has a FY24 dividend yield of 7.2%, or 10.3% if the franking credits are included in the yield.
Hearts and Minds Investments Ltd (ASX: HM1)
This LIC owns a portfolio of between 25 to 35 ASX shares and global shares based on the highest conviction ideas from respected fund managers. There are no management fees involved, instead it donates to leading Australian medical research institutes.
Some of the current businesses in the portfolio include Brookfield, Formula One Group, Guzman y Gomez, Mastercard, Microsoft, Games Workshop, Nexgen Energy (ASX: NXG) and Zillow.
Since the creation of this LIC, the portfolio has delivered an average return per year of around 10%, despite the rough 2022 period when it was heavily exposed to growth stocks’ heavy decline.
The ASX dividend share has maintained or grown its dividend each year since FY21. The FY24 dividend yield amounts to 5.8%, or 8.25% when including the franking credits.
