WAM Microcap Limited (ASX: WMI) has reported a significant outperformance of its investment portfolio, surpassing the S&P/ASX Small Ordinaries Accumulation Index by 8.9% over the six months ending 31 December 2024. The portfolio delivered a 14.4% return during this period, contributing to a 31.7% increase for the full 2024 calendar year, outperforming the index by 23.3%, marking a record high for the company.
Strong financial results and dividend increase
The company’s strong investment performance drove a 257.9% surge in operating profit before tax to $45.1 million (HY2024: $12.6 million) and a 240.6% increase in operating profit after tax to $32.5 million (HY2024: $9.5 million).
In response to its financial performance, the Board has declared an increased fully franked interim dividend of 5.3 cents per share, payable on 30 April 2025. This equates to an annualised fully franked dividend yield of 6.8% and a grossed-up yield of 9.7% when accounting for franking credits.
Investment outlook and market opportunities
Chairman Geoff Wilson AO highlighted the consistent investment outperformance, stating:
“The investment team have again delivered investment portfolio performance well in excess of the S&P/ASX Small Ordinaries Accumulation Index, with strong outperformance in each financial year since inception.”
Lead Portfolio Manager Oscar Oberg commented on future market conditions, noting:
“The team and I were pleased to deliver strong investment portfolio outperformance for WAM Microcap shareholders and we thank them for their continued support. Looking ahead, the interest rate cuts forecast for the second half of 2025 will provide a positive environment for initial public offerings and capital raisings. We expect to see a number of opportunities for corporate activity that will benefit the investment portfolio.”
Dividend sustainability and shareholder returns
WAM Microcap has a profits reserve of 48.6 cents per share as of 31 January 2025, representing 4.6 years of dividend coverage before the payment of the interim dividend. Since its June 2017 inception, the company has paid 64.75 cents per share in fully franked dividends, or 92.5 cents per share when including franking credits, translating to an average fully franked dividend yield of 8.4% and a grossed-up yield of 12.0%.
Portfolio contributors and sector allocation
Key contributors to the portfolio’s outperformance included Zip Co (ASX: ZIP) and Tuas (ASX: TUA), both of which rallied significantly in the last six months of 2024. As of 31 December 2024, WAM Microcap’s portfolio was diversified across multiple sectors, with major weightings in:
- Consumer discretionary (21.6%)
- Financials (18.4%)
- Industrials (17.0%)
- Information technology (12.7%)
- Healthcare (9.7%)
Net tangible assets and total shareholder return
The company reported a pre-tax NTA of $1.47 per share as of 31 January 2025, reflecting an increase from $1.39 per share in June 2024. The total shareholder return (TSR) for the six-month period was 8.8%, including the value of franking credits.
