This business can provide a retiree with everything they need.
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I believe the ASX dividend share WCM Global Growth Ltd (ASX: WQG) could be a top pick for retirees.
I've been a fan of the exchange-traded fund (ETF) version of the strategy for a while, and I think the listed investment company (LIC) has a compelling future for passive income too.
A LIC's job is to invest in other assets and hopefully generate investment returns for shareholders, which translates into accounting profits that can be turned into dividend payments.
WCM is a fund manager headquartered in Laguna Beach, California. It is deliberately far away from Wall Street in New York.
The WCM Global Growth is a strong pick for retirees because of how it generates returns and the dividend payments it's providing.
The ASX dividend share targets a global portfolio of shares, giving Aussies diversification and access to shares that we would not otherwise have exposure to. That's particularly true if a retiree's portfolio is extremely focused on Australian assets.
In terms of the stock-picking strategy, the investment team at WCM believes that the direction of a company's competitive advantage is far more important for driving shareholder returns than its size.
In other words, WCM is looking to invest in companies that are getting better over time. To identify the moat trajectory, the fund manager uses a "forward-looking lens focused on incremental change, as opposed to a backward-looking lens focused on static criteria."
Another key element for WCM, which the team thinks is a hidden advantage, is the culture of a business. WCM explains:
We believe culture is the most understudied and underappreciated facet of investing. Culture is a set of norms that shape behaviour, rather than simply values on the wall. We employ a team of dedicated culture research analysts who work in tandem with academics and practitioners. We have developed a robust framework to evaluate cultures, with a process centred around a proprietary set of questions, increasingly complemented by quantitative data.
There are approximately 20 to 40 stocks in the portfolio, which typically come from sectors like consumer, technology, and healthcare.
Impressively, the LIC's portfolio has delivered an average net return per year of 16.5% since inception in June 2017. I'm not forecasting the return to be as strong over the next decade, but I'm optimistic about the outlook.
The ASX dividend share's appeal for passive income
The business has steadily increased its annual dividend per share since FY19, indicating seven years of regular dividend growth for shareholders.
In FY23, the ASX dividend share shifted to paying dividends quarterly to shareholders, giving investors (including retirees) more regular passive income.
The company has guided that it will steadily increase its quarterly dividend in 2026. The guided payouts expected in 2026 amount to 9.01 cents per share.
If the business does pay that, it translates into a forward grossed-up dividend yield of 6.9%, including franking credits, at the time of writing. The share price is trading at a decent discount to the latest weekly net tangible assets (NTA).