WAM Capital Limited (ASX:WAM) is among ASX companies with an operating dividend reinvestment plan (DRP). Its DRP is operating for the 7.75 cent, 60% franked FY26 final dividend, while the board has set a lower dividend target of 8.0 cents per share for FY27.

The FY26 final dividend keeps the full-year total at 15.5 cents per share, in line with the amount paid in recent years. The FY27 target represents a change from that level, and the company has linked it to the profits reserve available to fund dividends.

Latest developments

WAM Capital reported an operating loss after tax of $125.9 million for FY26, compared with a $219.6 million profit in FY25. The result reflects negative returns from the investment portfolio during the year, a Reversal from the profits of recent years.

The board declared a final dividend of 7.75 cents per share, 60% franked, keeping the FY26 total at 15.5 cents. It also set an FY27 dividend target of 8.0 cents per share, made up of a 4.0 cent interim and a 4.0 cent final, with 60% franking expected. The company said the profits reserve will stand at 5.6 cents per share after the FY26 final dividend, and Chairman and Chief Investment Officer Geoff Wilson said maintaining the dividend at 15.5 cents per share was no longer sustainable with the profits reserve available.

WAM Capital held a full-year results webinar and has announced a series of Shareholder presentations in regional centres over the coming months.

Key numbers

Two dividends went ex in the past 12 months: the FY25 final dividend of 7.75 cents and the FY26 Interim Dividend of 7.75 cents, both 60% franked. Together they total 15.5 cents per share. The FY27 target of 8.0 cents per share is roughly half that amount.

The latest dividends are 60% franked. That is lower than the fully franked dividends the company describes in its objective, and it reduces the franking credits attached to each dividend. The value of franking credits depends on each investor's tax position.

WAM Capital reported pre-tax Net Tangible Assets (NTA) of $1.22 per share at the end of FY26.

About the company

WAM Capital is a listed investment company managed by Wilson Asset Management. It listed on the ASX in 1999 and invests mainly in small and medium-sized ASX-listed companies, aiming to deliver a stream of fully franked dividends, provide capital growth and preserve capital.

Wilson Asset Management manages several other listed investment companies, including WAM Active, WAM Research and WAM Microcap. Because dividends are paid from the company's profits reserve and franked from tax it has paid, a weaker year of investment returns can flow through to both the size and franking of dividends, as FY26 has shown.

How the DRP works

WAM Capital's DRP is operating for the FY26 final dividend. According to the company's results announcement, DRP shares are priced at a 2.5% discount to the volume-weighted average price (VWAP) of shares sold on the ASX over the four trading days from the ex-dividend date. The same 2.5% discount applied to the FY26 interim dividend, and the company confirmed the interim DRP price in an updated dividend notice.

For the interim dividend, the half-year results announcement stated that new shares would be issued under the DRP, which adds to the share count. Shareholders can refer to the final dividend notice and the DRP rules for the allocation method and the election deadline, which falls shortly after the record date.

Why it matters for shareholders

Dividend figures based on past payments are backward-looking. WAM Capital has paid 15.5 cents a year in recent years, while the FY27 target of 8.0 cents is roughly half that. Historical dividend data does not capture guidance changes of this kind.

For DRP participants, the 2.5% discount applies to the VWAP-based pricing methodology set out by the company. The company publishes monthly NTA updates, which provide information on the value of the underlying portfolio.

What comes next

The payment of the FY26 final dividend and the scheduled shareholder presentations are the next milestones. WAM Capital publishes monthly NTA updates, which will show how portfolio performance develops.

The FY27 dividend target of 8.0 cents is guidance and remains subject to investment returns and board decisions. Stronger performance could help rebuild the profits reserve, while further losses could put pressure on future payouts. The company expects franking to remain at 60% for FY27, and the DRP discount is set by the board for each dividend.

Risks and context

Dividend sustainability is the central issue. The company reported a loss for FY26 and has set a lower dividend target for FY27, so past payments may not reflect future dividends.

Performance risk also matters, as FY26 produced an operating loss, and listed investment companies can trade at a discount or premium to NTA. New DRP shares dilute non-participants. Reinvested dividends remain assessable income, and each DRP parcel sets a new cost base for Capital Gains Tax purposes.

Conclusion

WAM Capital (ASX:WAM) has declared a 7.75 cent, 60% franked final dividend for FY26 and is operating its DRP at a 2.5% discount. Following an operating loss for the year, the company has set an FY27 dividend target of 8.0 cents per share, which remains subject to investment returns and board decisions.

Key Insights

WAM Capital (ASX:WAM) maintained its FY26 dividend total at 15.5 cents per share, 60% franked, despite an operating loss after tax of $125.9 million. The board has set a lower FY27 target of 8.0 cents per share, linking the change to the profits reserve available to fund dividends.

The DRP remains in operation for the final dividend, priced at a 2.5% discount to the VWAP over four trading days from the ex-dividend date. Franking has been below the fully franked level described in the company's objective, and future dividends remain dependent on portfolio returns and board decisions.