There aren’t many financial stocks on the ASX that can claim they maintained their payout level while building their share price.
I can name one, WAM Capital Ltd [ASX:WAM].
The WAM share price has experienced a decent recovery since the market crash last year, propped up by dividend-starved investors as they search for a reliable stream on income.
Shares in the investment company lifted 1.34% or 3 cents today, to trade at $2.27 after the company released its trading performance results and reassured investors it would maintain its payout level.
Is it performance or dividends propping up the share price?
In a trading update released today, WAM detailed its portfolio performance in the financial year to date.
The WAM investment portfolio increased 22.8%, outperforming the ASX All Ordinaries Accumulation Index by 7.1%.
Over calendar year 2020, the WAM portfolio increased by 9.6%, again outperforming the index by 6%.
Since the portfolio’s inception in 1999, WAM has generated returns of 16.4% per annum.
Meaning, over the same time frame, WAM has outperformed the index by 8.1% per annum.
Its strong returns have meant the company has been able to maintain a steady stream of dividends, with the board announcing today a fully franked interim dividend of 7.75 cents per share.
Which equates to an annualised fully franked dividend yield of 6.9%.
Placing it as one of the highest dividend yielding stocks amongst its peers.
To give you a comparison, Milton Corp Ltd [ASX:MLT], a investment firm with a similar market capitalisation, posts a dividend yield of just 3.59%.
Will a return in bank dividends hurt the WAM share price?
Investors are expecting a revival in dividend payouts this year after weathering a dividend drought last year brough on by the pandemic.
There were some that managed to maintain their payouts during the height of the COVID-19 outbreak.
However, some of what were thought to be Australia’s go-to dividend stocks were forced to slash payouts, leaving income investors high and dry.
So, how likely is a return in dividend payouts this year?
In my book, we could see an improvement on last years, but it won’t be a return to pre-COVID levels.
At least not for the usual big payers.
ARPA forced the Big Four banks to cap payouts at 50% of profits in 2020.
This year they could pay out up to 70% of profit to shareholders, according to some analysts.
Though this is still a far cry from the +80% payout ratios that the big banks piled on their shareholders in 2019.
Perhaps dividends payouts can return to some sort of normality this year, though it just may be via the new big payers. In our special dividend report we reveal five Aussie superstars paying top dividends and set to thrive in the post-pandemic era. Claim your free report now.
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