Listed investment company (LIC) WAM Microcap Limited (ASX: WMI) has just announced its half-year result which included a large dividend increase.
WAM Microcap's profit numbers
WAM Microcap announced that it saw a 333.1% increase in operating profit after tax to $19.7 million. Chairman Geoff Wilson said the operating profit growth was reflective of the strong investment portfolio and growth in assets.
The results of LICs can seem confusing because they deliver investment returns, a return of -5% can seem bad in an absolute dollar sense compared to last year's result, whilst generating a return of 10% in one year and 20% in another year shows profit doubling in dollar terms. LIC profits aren't consistent like normal operating businesses.
Looking at the portfolio, over the six months to 31 December 2019 the WAM Microcap investment portfolio grew by 18.5% before fees, expenses and taxes, compared to 3.9% for the S&P/ASX Small Ordinaries Accumulation Index. Over the past year WAM Microcap's gross portfolio investment performance was 35.6% compared to 21.4% for the ASX Small Ords. The total shareholder return for the six months to 31 December 2019 was 23%.
Some of the shares that helped WAM Microcap's portfolio performance was IT business Data#3 Limited (ASX: DTL) going up 75%, plus-size clothes retailer City Chic Collective Ltd (ASX: CCX) which went up 44.6% and online retail company Temple & Webster Group Ltd (ASX: TPW) which saw its share price increase by 101.5%.
WAM Microcap dividend
The Board of WAM Microcap has declared an interim fully franked dividend of 3 cents per share, which is an increase of 33.3%.
Is WAM Microcap a buy?
WAM Microcap now offers an annualised grossed-up dividend yield of 6% based on the share price of $1.435. This is a solid yield in today's low interest environment, but it's not too high to be unsustainable at the current level. I'd be happy to buy some WAM Microcap shares today, particularly with the coronavirus volatility going on at the moment.
