Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
As a long time holder of WLE, I am suspicious that the 20% sell off in WAM last Friday will be replicated by other Wilson group funds as they continue to pay dividends which do not seem in step with current dividend yields from the major yield stocks that they own. Dividend cuts seem inevitable. Is this a fair assumption?
Hi Peter,
Last week’s sell-off in WAM Capital (WAM) was particularly savage, illustrating why many shareholders are on the register – reliable yield, which suddenly halved. Portfolio performance was the key issue here:
Importantly, WAM needs to make money to pay dividends in the future, with the risk being that if performance in FY27 repeats that of FY26, it will not have the earnings to support the dividend. It also needs to replenish its buffer, or retained earnings, to provide flexibility going forward, and its ability to do this will obviously depend on investment performance.
WAM Leaders Ltd (WLE) doesn’t have the same issue. WAM Leaders had a profit reserve of 26.9c per share at 30 June 2026, before payment of the 4.8c final dividend. This represents 2.8 years of dividend coverage at the current annual dividend rate. The other important point is that FY26 was a strong year for WLE. The portfolio returned 14.0%, outperforming the ASX 200 Accumulation Index by 7.9%, while operating profit after tax rose to $161.8m from $63.8m.
The assumption that WLE will experience the same fate as WAM is not a fair one. Each LIC must be considered individually, and all of this information can be found in their respective annual reports. What is a fair extrapolation between the two is that we doubt the boards will be as liberal in future in allowing reserves to deplete so significantly. They are therefore more likely to amend dividends lower, and earlier, if portfolio performance does not support the payout.
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