WAM Strategic Value Limited (ASX:WAR) offers shareholders a dividend reinvestment plan (DRP), which will operate without a discount for the upcoming 3.25 cent fully franked final dividend. The listed investment company (LIC) has lifted its full-year dividend to 6.5 cents per share after a year in which its investment portfolio outperformed its benchmark index.

Latest developments

WAM Strategic Value reported its FY26 results in August. Operating profit after tax rose to $12.7 million from $11.5 million in FY25, and Basic Earnings Per Share (EPS) came in at 7.06 cents. The company said its investment portfolio increased 9.5% in FY26, outperforming the S&P/ASX All Ordinaries Accumulation index by 3.8% while holding an average cash weighting of 22.0%.

The board declared a fully franked final dividend of 3.25 cents per share, matching the interim and taking the FY26 total to 6.5 cents, an 8.3% increase on the 6.0 cents paid for FY25. Since then, the company has released its August investment update and announced upcoming Shareholder presentations.

Key numbers

The FY26 Interim Dividend of 3.25 cents per share and the FY26 final dividend of 3.25 cents per share are both fully franked, compared with the 3.0 cent interim and 3.0 cent final dividends paid for FY25. The company franks its dividends at the 30% corporate tax rate, and the value of franking credits to any shareholder depends on their own tax position.

The company reported Net Tangible Assets (NTA) before tax of 127.04 cents per share at the end of August, up from $1.25 at the end of FY26. The profits reserve stood at 22.1 cents per share at the end of August.

About the company

WAM Strategic Value is managed by Wilson Asset Management and listed in June 2021. Its strategy is to identify and take advantage of share price discounts to underlying asset values, mainly among other listed investment companies and listed investment trusts. The company says it aims to deliver Capital growth, fully franked dividends and capital preservation over the medium to long term.

Geoff Wilson AO is Chairman and Portfolio Manager. The portfolio holds positions in LICs and LITs trading at discounts to their asset values, and the company may benefit if those discounts narrow, whether through market re-rating or corporate activity.

How the DRP works

Shareholders who participate in the WAR DRP receive additional shares instead of cash for their dividends. For the FY26 final dividend, elections must be lodged by the deadline set out in the company's dividend notice. The DRP will operate without a discount.

Under the plan, the board can satisfy DRP elections by transferring existing shares bought on-market, by issuing new shares, or through a combination. Shares bought on-market are allocated at their aggregate purchase price net of brokerage. New shares are issued at the volume-weighted average price (VWAP) of WAR shares sold on the ASX over the four trading days commencing on the ex-dividend date. The company has not said in advance which method it will use for this dividend, and the DRP booklet and dividend notice set out the applicable terms.

Why it matters for income investors

The company has paid a fully Franked Dividend stream that increased from 6.0 cents in FY25 to 6.5 cents in FY26. Franking credits attached to these dividends may provide additional value to shareholders able to use them, depending on individual tax circumstances.

Shares received through the DRP are acquired without brokerage, and each new parcel is eligible for any later dividends the board may declare. The DRP price is determined by the plan's methodology rather than by reference to the company's NTA.

The profits reserve of 22.1 cents per share is above the annual dividend of 6.5 cents, which the company indicates provides some capacity to support future dividends, subject to future results and board decisions.

What comes next

The FY26 final dividend is scheduled to go ex-dividend and be paid in the coming weeks, with the DRP election deadline falling shortly after the record date.

The company also holds shareholder presentations and publishes monthly investment updates showing NTA. Discount levels across the LIC sector and the portfolio's cash weighting remain relevant factors for the company's strategy.

Risks and context

Future dividends depend on investment returns and the board's decisions. LIC dividends are paid from profits reserves built from realised and unrealised gains, and a weak year for markets could reduce them. WAR's shares can also trade at a discount to NTA.

The strategy relies on discounts closing, which may take time or not happen at all, and it concentrates exposure in other listed investment vehicles. On tax, dividends reinvested through the DRP are still assessable income, and franking credits must be declared. Each DRP parcel also sets a new cost base for Capital Gains Tax purposes, so records need to be kept. If new shares are issued under the DRP, non-participating holders may see modest dilution.

Conclusion

WAM Strategic Value (ASX:WAR) operates a DRP at no discount for its 3.25 cent fully franked final dividend. A higher FY26 dividend, portfolio outperformance and a profits reserve of 22.1 cents per share form part of the company's reported position, while market returns, discounts to NTA across the sector and the timing of discount-closing opportunities remain key variables.

Key Insights

WAM Strategic Value (ASX:WAR) increased its fully franked FY26 dividends to 6.5 cents per share, supported by higher operating profit after tax of $12.7 million and portfolio returns of 9.5% that exceeded its benchmark index. Its profits reserve of 22.1 cents per share sits above the annual dividend, although future payments remain subject to results and board decisions.

The DRP operates without a discount for the final dividend, and the board may satisfy elections through on-market purchases, new share issues or a combination, with new shares priced at a four-trading-day VWAP starting on the ex-dividend date.