Highlights

  • HM1's 6.29% trailing yield (20 July 2026) is fully franked and unusually high for a concentrated global growth LIC, funded from realised gains rather than income.
  • The board has committed to lifting the half-yearly dividend by 0.5 cents every six months, subject to no sustained period of investment market underperformance.
  • HM1 shares traded near $2.94 against a 30 June 2026 pre-tax NTA of $3.67, implying a discount of roughly 20%.
  • Dividends are funded from realised capital gains and a profit reserve rather than dividend or interest income, so the payout can vary with markets.
  • HM1 charges no management or performance fees and instead donates 1.5% of NTA annually to Australian medical research, enabled by pro-bono fund managers.

Why the dividend yield is attracting attention

Hearts and Minds Investments Limited (ASX:HM1) is drawing attention on the high-yield dividend scan with a trailing yield of 6.29% as at 20 July 2026, fully franked and grossing up to 8.99%. For a conventional income stock that would be solid but unremarkable. For a concentrated, high-conviction global growth listed investment company, it stands out.

HM1 does not hold a natural stream of dividend or interest income the way a bank, insurer or REIT typically does. Its portfolio is built from equity ideas contributed by leading Australian and global fund managers, meaning most of the underlying return is intended to arrive as capital growth rather than yield.

That makes the source of the payout, rather than its size, the more important question for income investors to understand before treating this as a straightforward high-yield opportunity.

What changed?

Little has structurally changed at HM1 in the past year: there has been no special dividend, capital return or one-off asset sale behind the 6.29% yield. Instead, the board has methodically lifted the half-yearly dividend by half a cent per share across recent periods, from 7.0 cents in 2023 to 9.5 cents for the half-year to December 2025, paid in April 2026.

That gradual, telegraphed step-up, against a broadly steady share price, is what has pushed the trailing yield to a level that now looks unusual for a growth-focused LIC.

Why it matters

This matters because the yield's persistence depends on the board approving further step-ups from realised gains, not on a repeatable income stream. HM1 has flagged plans to keep raising the dividend by 0.5 cents every six months, but explicitly only 'subject to no sustained period of investment market underperformance' - a clear signal the policy is conditional, not guaranteed.

How the dividend yield was calculated

Trailing yield is calculated by summing dividends paid in the past 12 months and dividing by the current share price. As at 20 July 2026, the relevant payments were the 9.0 cents per share final dividend for the half-year to June 2025, paid 16 October 2025, and the 9.5 cents per share interim dividend for the half-year to December 2025, paid 16 April 2026.

Together these total 18.5 cents. Divided by the $2.94 share price, that produces a trailing yield of 6.29%. Both dividends were fully franked. Grossing up 18.5 cents at the 30% corporate tax rate gives a pre-tax equivalent of about 26.4 cents, or 8.99% - the grossed-up figure shown in the scan, a historical calculation based on dividends already paid, not a forecast.

Is a special dividend inflating the yield?

No. Unlike several other names on the same scan, HM1 has not paid a special dividend, capital return or one-off distribution behind its 6.29% yield. Every cent of the trailing 18.5 cents is an ordinary, board-declared half-yearly dividend.

What is unusual is the mechanism behind the payout. HM1's policy is to pay consistent, fully franked dividends 'subject to the performance of the portfolio,' and the company has flagged an intention to increase the half-yearly dividend by 0.5 cents every six months for the foreseeable future, subject to no sustained period of investment market underperformance.

Because HM1's assets are growth-oriented equities rather than income-generating assets, the dividend is funded predominantly from realised capital gains and HM1's profit and franking reserves, not from a natural yield on the portfolio. A fully franked yield of around 6.3% is a deliberate capital-management decision, not evidence of a high-yielding portfolio.

What the company does

Hearts and Minds Investments Limited is an ASX-listed investment company holding a concentrated portfolio of roughly 25 to 35 high-conviction equities across Australian and global markets.

Around 65% of the portfolio is built from the three highest-conviction ideas of each of six Core Fund Managers, including Caledonia, Cooper Investors and Magellan Asset Management, reviewed quarterly, while roughly 35% comprises ideas from the annual Sohn Hearts & Minds Investment Leaders Conference.

Fund managers contribute ideas without charging management or performance fees; in return, HM1 donates 1.5% of net tangible assets each year to Australian medical research, including the Victor Chang Cardiac Research Institute.

Latest financial performance

HM1 reported a pre-tax NTA per share of $3.67 and a post-tax NTA of $3.38 at 30 June 2026, with the portfolio gaining 4.1% for the month against a 3.3% rise in the MSCI World Accumulation Index (AUD), and management citing an average portfolio return of about 14.7% per annum over the three years to December 2025.

As an investment company, HM1's earnings are dominated by realised and unrealised gains on its equity holdings rather than steady operating revenue. Data provider Simply Wall St estimates trailing twelve-month net income of about $19.4 million, with half-year net income swinging between roughly $14.9 million and $91.9 million across 2025 - illustrating how sensitive HM1's profit, and its capacity to fund dividends from realised gains, is to market conditions. Investors should confirm current figures against HM1's own reports.

What could support future dividends?

Several factors could support HM1's dividend trajectory. The company carries no gearing-related funding pressure in the way an operating business might, and its policy of a modest, telegraphed 0.5 cent increase each half gives the board flexibility to moderate the pace if returns soften.

A three-year average portfolio return of about 14.7% per annum, if maintained, would comfortably exceed the current cash cost of the dividend. The pro-bono fund manager model means HM1 carries no management or performance fee drag, leaving more of any realised gain available for distribution.

A persistent NTA discount could also encourage the board to lean on reserves to support the payout, or consider other capital-management options, to narrow the gap between share price and asset backing.

What could threaten future dividends?

The clearest risk is that HM1's dividend is not backed by a natural income stream. If the concentrated portfolio of growth-oriented, high-conviction equities delivers weak returns over a sustained period, the company has flagged that its 0.5 cent step-up commitment is conditional on avoiding 'a sustained period of investment market underperformance,' implying dividends could be held flat or reduced.

Portfolio concentration across only 25 to 35 positions, with meaningful exposure to a handful of large global technology names and an unlisted holding in Rokt, means a single poor stock outcome can move NTA materially.

The franking account and profit reserve that fund the payout are finite; if realised gains fall short for several periods, franking sustainability would come under pressure. HM1's persistent NTA discount also means shares can underperform the underlying portfolio even if the dividend holds up.

Franking credits and grossed-up income

Franking credits are part of Australia's dividend imputation system: when a company has already paid corporate tax on its profits, it can attach a credit for that tax to dividends it distributes, which eligible Australian shareholders can use to reduce their own tax bill or, in some cases, receive as a refund.

HM1's policy commits to paying fully franked dividends, and the data shows its franking at 100% as at 20 July 2026, lifting the 6.29% cash yield to a grossed-up 8.99%. Because the payout is funded from realised gains and profit reserves rather than ongoing income, maintaining full franking depends on HM1 continuing to generate sufficient realised, tax-paid profits and an adequate franking credit balance.

This article does not provide personal tax advice; the value of franking credits depends on each investor's individual tax position.

What investors may monitor next

Income-focused readers may wish to track several markers over the next year: HM1's half-year result to 30 June 2026, expected around August 2026, and whether the board confirms the flagged 0.5 cent increase to a 10.0 cent dividend.

Also worth watching are the trend in pre-tax and post-tax NTA, published weekly, and whether the discount to HM1's roughly $2.94 share price narrows or widens; portfolio concentration and performance relative to the MSCI World Index; and commentary on the franking account balance, which underpins the sustainability of full franking.

Balanced conclusion

HM1's 6.29% fully franked trailing yield, as at 20 July 2026, is genuine and not the product of a special dividend or a share-price collapse. It reflects a deliberate board policy of steadily increasing a dividend funded from realised gains and profit reserves, layered on a concentrated global equity portfolio that also funds an annual donation to medical research.

That combination of income and impact is distinctive among ASX-listed investment companies, but it is not a conventional income holding: the payout depends on continued realised gains, the increase commitment is conditional, and shares trade at a notable discount to NTA. None of this makes HM1 a buy or a sell; investors should weigh the policy, concentration risk and their own circumstances before deciding.