WAM Capital Posts 10.5% Portfolio Decline with 15.5 Cents Dividend

Dividend Maintained Despite Portfolio Setback

Wilson Asset Management (ASX:WAM) announced a full-year dividend of 15.5 cents per share for FY2026, maintaining a 60% franking level. This represents a dividend yield of 15.9% on net tangible assets (NTA), significantly outpacing the S&P/ASX All Ordinaries Accumulation Index yield of 4.4%. The final dividend of 7.75 cents per share is scheduled to go ex-dividend on 8 October 2026, with payment on 21 October.

However, the investment portfolio faced headwinds, delivering a negative return of 10.5% for the fiscal year ended 30 June 2026. This downturn contrasts with the company’s longer-term performance, where it has outperformed key ASX benchmarks over seven years, delivering an annualised return of 8.5% compared to 8.1% for the All Ordinaries and 5.5% for Small Ordinaries.

FY2027 Dividend Target and Profits Reserve

Looking ahead, WAM Capital set a full-year dividend target of 8.0 cents per share for FY2027, also 60% franked. This target implies a grossed-up yield of 8.2% based on the 1 September 2026 share price of $1.24. The company estimates a profits reserve of 5.7 cents per share as of 31 August 2026, following the payment of the FY2026 final dividend. These figures remain provisional pending the August investment update due by mid-September.

Macro Headwinds and Sector Outlook

Wilson Asset Management cited several macroeconomic challenges weighing on small-to-medium industrial stocks during FY2026, including a shift from an interest rate cutting cycle to hiking, geopolitical risks inflating commodity and energy costs, and uncertainties around artificial intelligence’s impact on small-cap valuations. Additionally, federal policy changes affecting capital gains tax and negative gearing added complexity.

Despite these headwinds, the company highlighted encouraging signs for small-cap industrials: valuations have fallen to decade lows with some holdings trading below asset backing, such as Cedar Woods and Harvey Norman. The recent reporting season saw 70% of WAM’s 60 companies surpass earnings expectations. Furthermore, takeover activity in the sector has accelerated, reminiscent of the 2022 wave, while commentary from industrial companies suggests the interest rate hiking cycle may be nearing its end.

Dividend Coverage and Group LIC Performance

The profits reserve and dividend coverage metrics vary across the Wilson Asset Management group’s listed investment companies. WAM Capital itself shows a modest dividend coverage of 0.7 years based on the FY2027 target. Other LICs in the group, such as WAM Income Maximiser (WMX), have different dividend dynamics due to their focus on corporate debt and monthly income streams, making direct comparisons challenging.

Share price premiums and discounts to NTA also differ across the group, with WAM Capital trading at a slight premium of 2% as of 1 September 2026. This contrasts with other LICs like WAM Active (WMA), which trades at a 16% discount.