A ‘listed investment company’ is a substitute for a managed fund and have some advantages especially in a volatile market like to invest conservatively and achieve diversification at the same time. The companies invest in companies and trusts, fixed interest securities, real property development, and liquid assets; they have a portfolio of undervalued growth companies which are usually small-to-medium sized industrial companies listed on the Australian Securities Exchange. An important indicator of measuring LIC performance is Total Portfolio Return (TPR) and Total Shareholder Return (TSR).
One such stock is MILTON CORPORATION LIMITED (ASX: MLT) is a long-term investment company which invests in companies and trusts that are on the ASX. The company has NTA per share as on November 30, 2018, before tax of $4.47 and after tax of $3.98. As at November 30, 2018, the company has a market capitalization of $2.9 billion and total assets of $3.0 billion and the management expense ratio of 0.14%. Milton has a decent track record of paying dividends consistently over the years. Milton has been committed to generating stable dividend income for the shareholders, and the main part of the shareholder return in the Australian stock market comes from the tax effective dividend income. The company has a P/E of 21.770 and EPS of 0.198 AUD which is slightly high among its peer group. The stock has performed well as at December 13, 2018 and edged higher by 0.694% to trade at $4.350. However, since past one-year period, the company is generating a negative return of -7.49%.
Another listed investment company incorporated in Australia is WAM CAPITAL LIMITED (ASX: WAM) and continued to deliver solid performance during the year 2018. To merge with Century Australia Investments Limited WAM Capital’s board have declared that they have entered into a pact with them. The portfolio has returned 17.5% since inception in August 1999 while holding an average of 33.9% in cash. The TSR for WAM capital for the financial year ending June 30, 2018, was of 6.1% which was driven by investment portfolio performance of 15%. WAM has an attractive P/E of 11.400 and an EPS of 0.193 AUD which makes it a decent LIC stock among the peer basket. For the year ended June 2018, the company had a pre-tax margin of 88.7% and a pre-tax return on equity of 13.1% which is appropriate as per the industry standards. The stock has performed well as at December 13, 2018 and edged higher by 0.917% to trade at $2.200. However, since past one-year period, the company is generating a negative return of -8.40%.
Dividend Yield of MLT, WAM, Source: Thomson Reuters.
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