Is the WAM Global Limited (ASX:WGB) share price a buy for income? It currently offers a grossed-up dividend yield of 4.7%.
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Over time it could become one of the most useful ASX dividend shares to own in my opinion.
A quick overview of WAM Global
WAM Global is a listed investment company (LIC) with a focus on international shares. It was set up by Wilson Asset Management (WAM) in June 2018.
The job of a LIC is to invest in other shares which management believe are exciting opportunities.
The WAM investment team have a particular investment style. They try to find undervalued growth businesses where there is a catalyst which could send the company’s share price higher.
The lead portfolio manager of WAM Global is Catriona Burns.
Dividend yield and growth
At the current WAM Global share price it has a grossed-up dividend yield of 4.7%. That may not seem that high, but it’s the dividend growth that is particularly compelling. The WAM Global board decided to declare a final dividend of 4 cents per share, which was a 100% increase compared to FY19.
I think WAM Global can steadily increase its dividend and yield for investors as it generates returns and builds its profit reserve.
However, I’m not sure that investors can expect WAM Global to have as high of a dividend yield as WAM Capital Limited (ASX: WAM) because international shares obviously don’t attach franking credits to their dividends to WAM Global. Besides, not every LIC needs to a have a huge yield – I’d prefer a healthy mix of capital growth and dividends.
ASX shares only represent around 2% of the total global share market. There are plenty of high-quality investment opportunities outside of Australia which WAM Global can give investors access to.
At the end of August 2020, some of its largest investments included: Tencent, Arista, Aon, Avantor, Auto Zone, CME Group, Dollar General, EA, Edwards, Hasbro, Intuit, Lowe’s, Microsoft, Nomad Foods, Stroer, Software One and Thermo Fisher Scientific.
As you may be able to tell by the holdings, there is a noticeable weighting to US shares, but that’s just where a lot of the global share market is based. Just under two thirds of the portfolio was listed in the US, 7.9% was listed in Germany, 3.4% in Switzerland, 3.3% in the UK, 2.7% in Australia, 2.6% in Hong Kong and 2.1% in Japan with another 9.7% listed elsewhere.
It also had 5.2% of the portfolio as cash, which gives it an opportunity to buy other shares if it sees an opportunity.
Is the WAM Global share price a buy?
Aussies, particularly retirees, may be too focused on ASX shares for their portfolios. Particularly large cap ASX shares. Many of those large ASX names don’t offer much growth or global earnings diversification.
WAM Global offers investors a decent starting dividend yield, which is pretty good considering how low interest rates are at the moment.
Over the long-term I think this LIC will be good for dividend income because of the diversification that it offers and its focus on growth.
At the current WAM Global share price it’s trading at a 10% discount to the net tangible assets (NTA) at 31 August 2020 of $2.37.
One sign of whether something is a good buy is whether management are buying shares. It was announced today that WAM founder Geoff Wilson AO has bought $383,846 worth of WAM Global shares this week at an average price of $2.12 per share. He actually sold a similar amount of WAM Research Limited (ASX: WAX) shares to fund the acquisition of shares.
If Geoff Wilson thinks that the shares are worth buying this week then I think it’s worth paying attention.
I’d be happy to buy a parcel of WAM Global shares and buy more if the discount to the share price widens, or if there is a widespread selloff of global shares.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.