How WAM Global's active approach drives record dividends

Fund profile

• Name of the fund and ASX ticker: WAM Global (ASX: WGB)
• Asset Class: Global equities
• Investment objective: To provide capital growth over the medium-to-long term, deliver a stream of franked dividends and preserve capital while providing investors with exposure to global equities.
• LIC Website: WAM Global

Wilson Asset Management’s (WAM) Catriona Burns has had a standout year managing WAM Global, a listed investment company focused on international equities.

in February, WGB announced a record 6.50 cents per share dividend, with an additional special dividend of 4 cents per share, underlining the ability of LICs to generate strong and consistent income.

That’s especially impressive given that WGB’s fully franked yield, excluding the special dividend, sits at around 8%. 

"That highlights the strong value that LICs provide. We are able to accumulate profit reserves and stream dividends over time, which gives investors a reliable and steadily increasing income stream," she says.

An investment philosophy built on quality and value

WAM Global follows the proven investment philosophy that Wilson Asset Management has applied across its strategies for over 27 years.

“We focus on a company’s industry position, the quality of the management team, its earnings growth potential, valuation, and then try to identify catalysts," she says.

While WGB maintains a global investment approach, it can tilt its portfolio towards what it sees as the best opportunities. Currently, it's leaning towards global small and mid-cap companies (GSMIDs), where Burns identifies the greatest potential for mispricing.

“We're finding the best ideas within the small and mid-cap end of the market. We are seeing 20-year lows in terms of valuations for small mid caps relative to large caps, so it is a great time to be hunting in that end of the market.”

Why LICs over ETFs?

Many investors are leaning into low-cost ETFs for global equity exposure, but Burns highlights why an actively managed LIC offers unique benefits.

“Most ETFs in Australia are passively run, meaning they don’t pay attention to whether a company’s valuation is outrageous, whether the management team is strong, or whether the company’s industry position is improving or deteriorating,” she explains. 

“An active manager can pick stocks with strong fundamentals, while LICs can also accumulate profit reserves over time, allowing for more stable and franked dividends.”

For investors who prefer regular and predictable income, LICs offer a key advantage: profits don’t have to be distributed immediately like in a trust or ETF structure. Instead, they are retained in profit reserves, enabling WGB to smooth out dividends over time. 

“Many of our shareholders are self-managed super funds, and they love the reliability of regular, steadily increasing dividends rather than one sugar hit and then nothing,” Burns says.

Where is WAM Global investing now?

Given WGB’s strategy, Burns is currently focusing on undervalued small and mid-cap stocks with strong growth potential. “We look for businesses that fit our process, where we believe they can sustainably grow over time and have very high-quality management teams,” she says.

A few that stand out include:

• Hemnet (Sweden’s dominant property portal)
• CTS Eventim (a European leader in ticketing and live entertainment)
• RB Global (a major player in asset management and auctions)

While GSMIDs are the focus, Burns highlights WGB can hold large caps if compelling opportunities arise.

Managing risk in volatile markets

Burns is acutely aware of the risks that come with investing in global equities. She and her team manage risk through sector and geographic exposure, position sizing, and the ability to hold more cash in times of uncertainty.

“We manage risk via position size and are very much aware of both our sector bets and our geographic bets. We also have the ability to flex up cash if we see extreme risks,” she explains.

Understanding LIC premiums and discounts

A common consideration for LIC investors is whether a stock is trading at a discount or a premium to its net asset value. Burns offers a simple view: “A discount is an opportunity to pick up a dollar for 80 cents.”

She encourages investors to consider taking advantage of discounts when they arise but to be mindful of premiums, where shares might be overvalued relative to their underlying assets.

“When you’re trading at a premium, you’re trading above the value of the underlying assets. While we don’t provide financial advice, we’ve always been open with shareholders about the potential advantages of buying at a discount and possibly selling at a premium,” she says.

Final thoughts

With an 8% yield (excluding special dividends) and a focus on high-quality, undervalued growth companies, WAM Global is positioning itself as an option for investors seeking both capital appreciation and income.

Burns remains bullish on the opportunities in GSMIDs, believing that the current market conditions present a rare window to invest in companies with strong long-term potential.

Learn more

WAM Global (ASX: WGB) provides investors with exposure to an actively managed diversified portfolio of undervalued international growth companies and exposure to market mispricing opportunities. For further information, please visit the WAM Global website.