WAM Capital’s Dividend Sustainability Faces Test Despite Strong Returns

Strong Portfolio Performance Amid Market Volatility

WAM Capital Limited has reported a solid financial year ending 30 June 2025, with its investment portfolio delivering a 22.2% return. This performance notably outpaced the S&P/ASX All Ordinaries Accumulation Index by 9.0% and the Small Ordinaries Accumulation Index by 9.9%, underscoring the effectiveness of its active management strategy focused on undervalued growth companies.

Despite a 6.6% decline in revenue to $355.7 million and a 4.8% drop in pre-tax profit to $304 million, the company maintained a strong operating profit after tax of $219.6 million. The results reflect a year marked by significant market volatility, geopolitical tensions, and shifting economic conditions, yet WAM Capital’s portfolio resilience and stock selection have delivered both capital growth and income to shareholders.

Dividend Stability and Attractive Yield

The Board declared a final dividend of 7.75 cents per share, partially franked at 60%, maintaining the full-year dividend at 15.5 cents per share. This translates to a compelling 10% dividend yield on the company’s share price of $1.545 as of 30 June 2025, and a grossed-up yield of 12.6% when factoring in franking credits. The net tangible asset (NTA) backing per share rose to $1.57 before tax, reflecting the underlying portfolio strength.

WAM Capital’s dividend coverage remains robust, supported by a profits reserve of 20.3 cents per share before the final dividend payment. The Board signaled its intention to sustain dividend levels in FY2026, contingent on continued portfolio performance and the generation of franking credits, which depend on tax paid on realised profits and dividends received from investee companies.

Sector and Stock Highlights

The technology sector was a standout contributor, with holdings such as Life360 Inc, Catapult Sports, Technology One, and Pro Medicus delivering strong returns driven by subscription growth, contract wins, and earnings upgrades. Defence-related companies like Codan and Megaport also benefited from geopolitical instability and increased government spending.

Financials, including Generation Development Group, HUB24, and Pinnacle Investment Management, contributed positively, while the portfolio’s diversified exposure spans consumer discretionary, healthcare, communication services, and industrials. The investment team tactically managed positions in companies facing headwinds, such as Web Travel Group and NRW Holdings, demonstrating active risk management.

Governance, Advocacy, and Future Outlook

WAM Capital’s governance remains strong, with an experienced Board led by Chairman Geoff Wilson AO. The company continues to advocate for retail investors on key policy issues including superannuation taxation and capital market reforms. Education initiatives and philanthropic commitments through Wilson Asset Management further underscore its broader community engagement.

Looking ahead, the investment team anticipates a potential end to the recent small-cap underperformance cycle, supported by expected interest rate declines and structural tailwinds in sectors such as housing and consumer services. The portfolio remains well positioned to capitalize on emerging opportunities and market dislocations.