I think that WAM Research Limited (ASX: WAX) is one of the most attractive ASX dividend shares on the ASX.
WAM Research is a listed investment company (LIC) that invests in small and medium market cap businesses where it sees a catalyst that can improve the valuation.
It follows the same proven WAM strategy of sticking to cash unless it can find a good opportunity.
The 'research' part of the name refers to the fact that it only looks at the underlying quality of the businesses it's investing in. It's not simply going for a share that is trading at a discount to its net tangible assets (NTA).
Here are three simple reasons why I think WAM Research is a great dividend pick:
Dividend yield
It currently offers shareholders a trailing grossed-up dividend yield of 9.5%. This is far better than what you can get from a savings account, or indeed from most other ASX shares.
Dividend growth
A high yield is only worth considering for the long-term if the dividend is growing. If the dividend is flat or going backwards it can be a yield trap like with Telstra Corporation Ltd (ASX: TLS).
The WAM Research dividend has grown every year since the GFC. It's not like the dividend has been growing by just 1% a year either. In FY18 the dividend was increased by 5.5% thanks to a healthy profit reserve due to previous good investment performance.
Strong gross returns
WAM Research has only been able to pay such a good dividend because the underlying portfolio's return has been so good.
Over the past seven years it has generated an average return per annum of 17.8% before fees and taxes, solidly outperforming the S&P/ASX All Ordinaries Accumulation Index.
Foolish takeaway
The one thing holding me back from investing in WAM Research at the moment is the large premium to its NTA. It's currently trading at a 24% premium to the NTA declared at the end of November 2018. This is very high and hard to justify buying for total returns at the current value.
