For more than five years, shareholders in Wilson Asset Management’s flagship WAM Capital have relied on a steady annual dividend of 15.5¢ a share, paid consistently regardless of how much money the listed investment company was making.
That all changed on Friday, when WAM shocked its loyal army of income investors by slashing its dividend target for the 2027 financial year nearly in half to 8¢ a share. WAM Capital’s stock price plunged 18.5 per cent on the day to a 16-year low of $1.23.
Chairman Geoff Wilson fronted investors in a webinar on Wednesday afternoon to explain the dividend cut.
They did not hold back, questioning whether the level of performance fees remained appropriate; had Wilson created too many different LICs and lost focus? Why was the dividend target reduced in one step rather than gradually? And how will WAM Capital rebuild shareholder confidence?
Wilson admitted that WAM Capital had kept its dividend too high in recent years, at a level that exceeded the profits being generated by the LIC. That had forced the board to draw on its profit reserves to maintain those payouts, shrinking the pool of capital to unsustainable levels.
“The board won’t be as gung ho as we were back then … we pushed it too hard,” Wilson said. “It’s the board’s responsibility and myself as chairman, we probably should have cut the dividend earlier.”
It follows a horror 12 months for WAM Capital’s investment portfolio, which declined 10.5 per cent in the 2026 financial year, underperforming the benchmark S&P/ASX Small Ordinaries Accumulation Index by 18.6 per cent.
Still, the portfolio has returned 14.5 per cent a year since inception in August 1999, beating the benchmark by 9 per cent.
The small-cap fund, which manages $1.4 billion in assets, has more recently been hit by a rush into larger ASX-listed companies and resources stocks, which WAM Capital largely avoids.
“The 2026 financial year was personally the hardest year I’ve ever had investing since I started close to 20 years ago, and from WAM Capital’s perspective, it was the hardest year we’ve had since the global financial crisis,” said lead portfolio manager Oscar Oberg.
“On behalf of myself and the team at WAM Capital, we acknowledge the pain that shareholders will be facing right now, but you can be rest assured that we are working extremely hard to make sure WAM Capital is best positioned for when the market settles.”
The fund was wrong-footed by a sell-off in consumer discretionary stocks, triggered by higher interest rates, and in small-cap technology, software and service companies amid concerns that the roll-out of artificial intelligence would threaten their business models.
WAM Capital was also caught with exposure to Corporate Travel, which was hit by accounting issues, and telecom group Tuas, which suffered a regulatory setback.
“We made some mistakes last year,” Oberg said. “Corporate Travel was probably the worst investment I’ve ever made in my career.”
The LIC reported a $125.9 million operating loss after tax for the year ending June 30, compared to an operating profit of $219.6 million the prior year.
Following payment of its FY26 dividend on October 21, WAM Capital’s profit reserve will sit at just 5.6¢ a share, far below the 7.75¢ required to maintain its interim dividend and keep its full-year payout at 15.5¢.
On Friday, Wilson tried to restore some confidence by purchasing about $313,250 worth of stock through his superannuation fund Dynasty Peak. WAM’s former chief executive Kate Thorley, who recently switched into the role of executive director, bought $10,582 worth of WAM Capital shares on Tuesday.
But that has done little to appease shareholders, with the stock closing at $1.24 on Wednesday.
Wilson assured investors that WAM Capital’s revised dividend target wouldn’t affect any of the firm’s other LICs.
Source: https://www.afr.com/markets/equity-markets/have-you-lost-focus-wam-investors-question-shock-dividend-cut-20260902-p60tmy