According to an article on LICs from Firstlinks earlier this year, “the number of LICs listed on the ASX peaked at 115 almost six years ago and is down to 88 now.”

As I shall touch on further down, more strategic reviews of ASX LICs are currently taking place so the number should again decline further over the next year.

Some of these LICs used to be a favorite for SMSF investors in Australia for seeking fully franked yields.

Before I discuss the title of this post though, I shall first touch on ASX bank shares. This is another area where potentially “boomer” investors in Australia may not have as many attractive choices compared to years gone by.

ARE THE BIG ASX BANKS EXPENSIVE TO BUY FOR YIELD RIGHT NOW?

Throughout my investing life over decades, the retail investors either approaching retirement in Australia or perhaps in retirement, has had a big appetite for bank shares. It has generally served them quite well performance-wise, and also for convenience. The ongoing high fully franked dividends have been very consistent for planning and also tax effectiveness.

There have not been too many scary times for long term holders. This year has also been very kind to them, but if they read the financial press there is no shortage of articles this year warning about potential risks, which is a bit of a change.

Here is a selection of only some of them this year.

ARE CBA SHARES OVERVALUED IN 2024?

January

CBA shares: Commonwealth Bank’s bull run makes it Australia’s most overvalued bank (afr.com)

February

This clown (me) said CBA shares were overvalued in February before they have gained almost 25% since!

CBA SHARES ARE OVERVALUED IN 2024, WIDOWMAKER TRADE IS BACK? (substack.com)

July

CBA share price continues to defy gravity ASX:CBA (smh.com.au)

CBA share price: Did the Commonwealth Bank peak this week at $133? (afr.com)

Why Commonwealth Bank is seriously overvalued – Greg Canavan | Livewire (livewiremarkets.com)

Page from PM Capital July Investor presentation

The general consensus has been the other major banks are not as overvalued as CBA, but nonetheless also relatively expensive.

Whilst I don’t expect the investors already in the bank stocks to rush out and sell them given they may have to pay capital gains tax, I wonder whether the average private investor would direct any more new purchases to this sector.

WAM ASX LICS DIVIDEND YIELDS

Certain ASX LICs in some cases in the past have traded expensive on the back of promoting the steady stream of fully franked dividends they can provide. Given some of the crazy premiums to NTA I have seen investors pay, to me it is evidence of the love for yield.

Some that spring to mind are the Wilson stable, the likes of WAM, WAX, WAA at times hitting premiums of 30% or more.

PMC about 15 years ago trading at similar premiums also, ironically only recently now converting to open ended structure due to trading at a large discount! ALF was another example of a LIC that went through a similar pattern and converted to open ended structure a few years ago.

HOW MANY ASX LICs ARE CLOSING AND WHICH LICs HAVE CLOSED DOWN?

If you believe in my point about retail investors potentially being reluctant to make new investments in the bank sector for yield, where might they turn to?

If they ponder ASX LICs, there is a lot less around compared to a few years ago.

Here are some that have changed their structure in recent times, mainly in the last few years. All I did here was glanced at a LIC report from Morningstar in 2020, and selected the ones below where I think from memory do not exist in their old form.

MGF

FOR

MHH

ALF

APL

TGG

MA1

CWF

AEG

CIE

OZG

PIC

WIC

8EC

EAI

PAF

BAF

NBI

PGG

Here are some more ASX LICs that might be no longer in their usual form soon. Perhaps being restructured already, or in the process of discussions with formal reviews / conversations with shareholders about the appropriate future.

Platinum Capital Limited (ASX:PMC) – (currently in process of re-structure)
Platinum Asia Investments Ltd (ASX:PAI) – (currently in process of re-structure)

Ryder Capital Ltd (ASX:RYD) – (undergone strategic review)

Spheria Emerging Companies Ltd (ASX:SEC) – (Q4 discount to NTA to determine outcome of review)

Tribeca Global Natural Resources Ltd (ASX:TGF) – (“Board has initiated a process to consider the merits of the LIC structure versus other structures and we will update shareholders with our findings indue course.”)

ACTIVIST INVESTOR TRIBECA TARGETS GLENCORE (substack.com)

Excelsior Capital Ltd (ASX:ECL) – (future determined in part by proceedings in Federal Court for ECL to be wound up)

Excelsior Capital ECL ASX directors acting in best interest – Leanne Catelan (substack.com)

THE NEW ASX LICs SINCE 2020?

I made need some help here for people to remind me some, I think possibly I have forgotten a couple.

Am pretty sure though it could be described as hardly any.

A couple that spring to mind though are below:

Salter Brothers Emerging Companies Ltd (ASX:SB2)

Salter Brothers set to break the LIC listing drought – Salter Brothers

WAM Strategic Value Ltd (ASX:WAR)

WAM Strategic Value – IPO Report – Independent Investment Research – Listcorp.

I feel sorry for the investors that bought these at IPO.

In chart terms, we can view this theme of LICs closing, but almost no new ones starting up, below:
 

The chart is about 6 months old so it could look worse now. We can see we may have lost about 30 LICs from the peak of about 115 as we came into 2020.

Admittedly the above chart shows that in market cap terms, the size of the LIC market had still grown modestly over the period. Such “growth” however though is very poor though in the context of the money chasing funds to invest in the market, and even more poor if you looked at the explosion in the popularity of ETFs.

IS THE ASX LIC MARKET DEAD?

To try to present both sides to this theme, I have seen a couple of small signs that some investors are out there that still might desire this ASX LIC structure that might deliver consistent fully franked yields.

What comes to mind though, is more some recent reports about Australian investors wanting the diversification of global equities, but some yield also.

WHAT IS THE PGF ASX DIVIDEND YIELD 2024?

PM Capital Global Opportunities Fund Ltd (ASX:PGF) for example raised plenty of capital in their existing LIC recently. With latest dividend guidance of 11c a year fully franked, that equates to an approximately 5% yield.

PM Capital initiates $100m capital raise – Financial Newswire

WHAT IS THE AFIC ASX DIVIDEND YIELD IN 2024?

There was even talk the long-standing Australian Foundation Investment Co Ltd (ASX:AFI ) AFIC might want to start up a global equities version.

AFIC eyes global growth amid strong domestic performance | Finance News Network (finnewsnetwork.com.au)

Reading between the lines, do AFIC also think the Australian bank sector is a poor way to try and get yield now?

Australian Foundation Investment Co Ltd (ASX:AFI ) AFIC does currently pay a fully franked yield of only approximately 3.5%. This is however, on the low end of what we have become accustomed to from AFIC over the last few decades. This is despite AFIC trading at the largest discount to NTA over the last decade. This in itself should help it trade on a higher dividend yield than would otherwise be the case.

AFIC still has over 20% allocated to bank shares and more than 9% to other financials.

ASX LIC SHARES PAYING HIGH FULLY FRANKED DIVIDEND YIELDS FOR 2025

As we can see from above, there is less choice available for those hunting yield from ASX LICs.

The list seems almost certain to shrink further, I wonder what ones will be left of any reasonable size and liquidity, and pay a reliable yield?

A lot of the large ASX LICs simply have poor track records, which I have mentioned in other blog posts before such as below:

 

What does it leave us with?

Well, I guess with the demand of PGF ASX lately as I highlighted below, and its strong performance we can probably assume that lasts for a while yet.

WHAT ASX LICs PAY DIVIDEND YIELDS OF OVER 5%?

Some other large global LICs with high yields that I noticed with reporting season last month were:

VGI Partners Global Investments Ltd (ASX:VG1) – 5.4% dividend yield

The catch with VG1 I suppose is their poor record in the past since listing, but as I have discussed before it is kind of undergoing a re-branding. The presentations these days mostly highlight the high level decision makers of Phil King at Regal or Paul Moore at PM Capital, some of the best long short managers Australia has had.

 

Hearts and Minds Investments Ltd (ASX: HM1) – 5.4% dividend yield

Note HM1 has 56 cents a share of future dividends they know for sure can be franked. HM1 has not performed that well historically but has not been a disaster either. Because it has a charity aspect to it, I would guess this is safe to still survive in the years ahead even if other ASX LICs may continue to close.

Saba Capital has a major stake in HM1 but I doubt Boaz Weinstein there would be brave enough to suggest radical changes due to the money that flows to charity here.

Then I look at the yield on CBA these days and I had to double check it because it seemed rather low compared to what I am accustomed to, a yield of 3.3%?

To be clear I am not suggesting at all that these 2 LICs might necessarily make good investments, but rather that sometimes the ones that simply can survive can win in the race somehow, whether deservingly or not.
 

Good luck wherever you search for yield now on the ASX. If it happens to be CBA you may well need it, according to some of the bears now increasingly discussing the stock.

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