Wilson Asset Management fund lifts dividend, sees China as a tailwind

The investment group, chaired by Geoff Wilson, has lifted its dividend after a strong outperformance in the first half, with its investment portfolio up 9.6 per cent.

Geoff Wilson and portfolio manager Matthew Haupt of Wilson Asset Management. Picture: Renee Nowytarger/The Australian

WAM Leaders is tipping China to be a tailwind for iron ore miners this year and believes the worst is over for the banking sector, as the investment firm reaped the benefits of a move to cyclical stocks that pushed its investment portfolio up 9.6 per cent.

The company, chaired by Geoff Wilson, rewarded investors with a 14 per cent lift in its interim dividend to 4c a share, from 3.5c last year. Lead portfolio manager Matthew Haupt said the strong performance was achieved by the fund positioning for a shift to more normalised policy settings.

“It was really just positioning the portfolio for a regime shift from the abnormal post-Covid period to more normal settings,” Mr Haupt said.

“It was also stock selection: there were a lot of opportunities out there as money was going into the growth stocks and we were positioned for that money to return to the stocks that were out of favour.”

The fund was on the hunt for buying opportunities in the current market, he added.

“We believe upcoming periods of volatility will present further inflection points and opportunities for the investment team to deliver performance for the benefit of our shareholders.”

The outlook for iron ore miners was positive this year, Mr Haupt said on Thursday.

“China is in a loosening phase right now, so that’s why we’re invested in some of those miners, particularly iron ore,” he said. “We think China is potentially a tailwind this year.” The fund holds positions in Rio Tinto and BHP.

The LIC’s biggest sector holding at December 31 was financials, at 30 per cent of the total fund, with Commonwealth Bank, NAB and ANZ among its top positions. Like much of the market, the major lenders have seen their share prices tumble in the first few weeks of 2022, with CBA down 7.5 per cent, ANZ falling 3.7 per cent and NAB losing 5 per cent.

But the banks are at a low point for net interest margins, Mr Haupt said. “I wouldn’t be too bearish the banks,” he said. “Once they get past these results, things could improve for them. I’m not suggesting go overweight the banks, but I just wouldn’t be too negative.”

WAM Leaders’ 4c-a-share dividend means that, based on the February 2 closing share price of $1.46, the securities are trading on an annualised fully franked dividend yield of 5.5 per cent, or 7.8 per cent grossed up.

The dividend boost is its seventh increase since inception in 2016 and comes after the LIC beat its benchmark, the S&P/ASX 200 Accumulation index, by 5.8 per cent over the six months to December 31.

Over the 2021 calendar year, the WAM Leaders investment portfolio surged 28.3 per cent, outperforming the index by 11.1 per cent. All performance figures are before taxes and fees.