I think one of the best times to invest in a leading ASX dividend stock is when the business has fallen significantly. That’s because of the compelling dividend yield that it can unlock. The business WAM Microcap Ltd (ASX: WMI) is one of the leading dividend picks out there, in my view.
When a share price falls, it delivers a similar boost to the yield. For example, if an investment has a 5% dividend yield and the share price falls 10%, then the yield becomes 5.5%.
I believe WAM Microcap is a compelling investment today because it’s down 35% since October 2021 and 22% from October 2025.
Let’s get into why it’s a compelling buy today for passive income.
Exciting investment strategy
This business is a listed investment company (LIC). WAM Microcap aims to give investors exposure to a portfolio of undervalued ASX microcap shares (the majority of which are growth companies), with a market capitalisation of less than $300 million at the time of acquisition.
WAM Microcap can also provide exposure to “relative value arbitrage and market mispricing opportunities”.
The ASX dividend stock’s main sector focus is industrial shares, which gives it a large hunting ground, though at the end of July 2026 it also had a portfolio double-digit exposure to consumer discretionary, financials and IT stocks.
Investing in small-cap stocks can deliver strong returns because they are earlier in their growth journeys than blue-chip stocks. These businesses are often under-researched by analysts and, as a result, can be mispriced.
Since inception in June 2017, its portfolio has returned an average of 13.1% per year (before fees, expenses and taxes), doubling the return of its benchmark in that time.
Large dividend yield
One of the benefits of the LIC structure is that it enables the investment returns to be turned into a smoothed dividend. Excellent returns in one year can be accumulated to help pay for the dividend in a weak year.
The ASX dividend stock recently announced its FY26 annual dividend. It represents a very large annual dividend yield, which is a pleasing way to receive returns.
In FY26, its annual payout of 10.7 cents per share equates to a grossed-up dividend yield of 10.75%, including franking credits.
Rising payouts
Perhaps what’s even more important to me is that WAM Microcap has provided a very reliable dividend over the years.
It started paying a dividend in FY18, and that dividend has grown every year since then, aside from FY24, when it was maintained. The FY26 payout was only increased by 1%, but when you’re talking about a double-digit dividend yield already, any increase is pleasing.
I think this is a great time to invest in the ASX dividend stock for passive income.
The post 1 ASX dividend stock down 35% I’d buy right now appeared first on The Motley Fool Australia.
Should you invest $1,000 in Wam Microcap right now?
Before you buy Wam Microcap shares, consider this:
Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Wam Microcap wasn’t one of them.
The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
And right now, Scott thinks there are 5 stocks that may be better buys…
* Returns as of 1 August 2026
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More reading
- This fund just declared a dividend yield of better than 7%
- WAM Microcap hikes dividend for FY26 despite tricky year
- 2 ASX passive income ideas I’d use to generate $200 a month in 2027
- How much is needed in superannuation to target a $2,000 monthly passive income?
- This fund manager thinks these ASX shares are buys and have big potential!
Motley Fool contributor Tristan Harrison has positions in Wam Microcap. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.