The ASX share WAM Microcap Ltd (ASX: WMI) is the stock in my portfolio with the highest dividend yield. But I like the business for more than just the passive income it offers.

WAM Microcap is a listed investment company (LIC) that aims to invest in the most exciting undervalued growth opportunities in the microcap end of the ASX share market.

It has been in my portfolio for a long time and I still own it for a few compelling factors.

Small-cap exposure

There are hundreds and hundreds of businesses on the ASX of a variety of sizes. We’re familiar with the large businesses within the S&P/ASX 200 Index (ASX: XJO), but there are a lot of other stocks with smaller market capitalisations.

A lot of ASX shares can produce good returns, particularly the smaller ones because they may be underrated by the market and they could have a lot of growth ahead of them.

I think those smaller stocks are worth getting exposure to with their return potential, but I’m using the WAM Microcap investment team to pick those stocks at the small end of the ASX share market.

In my view, the smaller you go down the market capitalisation list, the more important it is to fully understand the business, the balance sheet and so on.

Despite difficult investing conditions, the WAM Microcap portfolio has performed very well over the long term. Since June 2017, it has delivered an average annual return of 13.5%, before fees, expenses, and taxes. That’s close to double the return of its benchmark.

Diversification

The portfolio is not just a few small-cap names, but dozens of small ASX shares with good return potential. It really adds to my diversification with the various names in the portfolio.

I like how its portfolio is spread across a number of sectors – more than 9% of its portfolio is invested in industrials, consumer discretionary, financials, IT, healthcare and materials.

It’s a pleasing addition to my portfolio, and only after considering the two elements above am I happy to enjoy the business’s passive income.

Big dividend income

As a listed investment company, WAM Microcap has the ability to turn investment returns into dividend cash payments for shareholders.

It’s helpful for the LIC to pay huge dividend income to ensure the LIC stays small – that’s important when it comes to small-cap investing, otherwise the LIC would become too big.

WAM Microcap has grown its annual dividend every year since FY18, except for FY24, when it maintained the dividend. That’s a great record of stability.

In FY26, it grew its annual dividend per share by 1% to 10.7 cents per share. That translates into a grossed-up dividend yield of more than 11.6%, at the time of writing. It has a profit reserve of 49.8 cents per share as of August 2026, so it already has enough accounting funding to pay dividends for close to five years.

It’s a great ASX share for dividend income.

The post Why I own this ASX share with a dividend yield of 11.5% appeared first on The Motley Fool Australia.

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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.

Megaport Ltd (ASX: MP1) shares are on watch on Tuesday after the tech company announced almost $1 billion in new AI contracts.

The Megaport share price finished yesterday’s session down 3.92% at $18.85, although the stock has still climbed around 60% in 2026.

Megaport has delivered a raft of positive updates this morning, giving investors plenty to think about when trading gets underway.

So, let’s take a closer look.

Megaport lands almost $1 billion in new contracts

The biggest news this morning is the signing of three new AI infrastructure contracts through Megaport’s Latitude.sh business.

The deals are worth roughly $978.6 million in total and cover GPU and CPU compute, network, and storage services.

Two are with new customers, while the other expands an existing relationship.

Megaport will also receive around $322.6 million in prepayments, with roughly $281.5 million coming from one new customer before services are delivered.

Once everything is up and running, the company expects its pro forma annual recurring revenue (ARR) to reach around $1.1 billion.

That takes the total value of strategic contracts announced since April to about $2.3 billion.

CEO Michael Reid said:

Since April, we’ve announced approximately A$2.3 billion in total strategic contract value.

He added that the company is “just getting started”.

Business continues to grow

There was also a positive update on how the rest of the business is tracking.

Network ARR reached $302.6 million in August, up 29% year on year on a constant currency basis.

Net revenue retention increased to 116%, compared with 110% a year ago.

But it’s the Compute side of the business where the numbers are really starting to grow.

Compute ARR reached $201.4 million as of 22 September, up 90% since the end of June and 227% since Megaport completed the Latitude.sh acquisition.

Megaport is now billing more than $500 million in Group ARR, not including the full impact of the contracts announced today.

FY27 guidance upgraded

With all of this coming through, Megaport has upgraded its FY27 guidance as well.

Revenue is now expected to come in between $720 million and $810 million, compared with the previous range of $620 million to $730 million.

EBITDA margins are also expected to be higher, with guidance increasing to 42% to 44%.

Of course, all this growth comes at a cost.

Megaport now expects FY27 capital expenditure of between $1.78 billion and $1.88 billion, which is around $500 million higher than its previous guidance.

Despite the higher investment, Megaport says it remains fully funded, with pro forma liquidity of approximately $362.2 million.

The post Megaport shares on watch after locking in almost $1 billion of new AI deals appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Megaport. 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.

The Medibank Private Ltd (ASX: MPL) share price has drifted lower, whcih this has given investors the chance to buy with a larger dividend yield.

When a share price declines, it means the dividend yield rises at a similar rate.

For example, if a business had a dividend yield of 5% and the share price declines 10%, then the dividend yield becomes 5.5% – a rise of 10%.

At the time of writing, the Medibank Private share price has declined by 14% since 7 August 2026, as shown in the chart below.

The business could be an attractive opportunity to look at for passive income. Let’s take a look at whether it’s a good buy today.

Dividend projection

The company reported a solid set of numbers in FY26, and this could continue into the 2027 financial year.

FY26 saw 22,100 (or 1.1%) net resident policyholder growth, with health insurance operating growth to $769.8 million. Segment operating profit rose 6.4% to $870.5 million, partly thanks to Medibank’s healthcare segment profit rising 31.3% to $100.7 million.

The company’s 6.7% rise in group operating profit to $813.5 million helped fund a 6.7% rise in the dividend per share to 19.2 cents.

At the current Medibank Private share price, the FY26 dividend translates into a grossed-up dividend yield of 6%, including franking credits, at the time of writing.

The projection on CMC Invest suggests that the ASX healthcare share could increase its annual dividend per share by 6.25%, leading to the company’s FY27 grossed-up dividend yield rising to 6.4%, including franking credits, at the time of writing.

That’s an impressive dividend yield for a business offering defensive earnings and exposure to the long-term tailwind of ageing demographics. It looks more appealing than the term deposit rates at the moment.

The company’s FY27 guidance of resident policyholder growth, non-resident private health insurance gross profit growth, and an increase in healthcare segment profit suggests to me that the 2027 financial year could be another good year.

Is this a good time to invest at the current Medibank Private share price?

According to CMC Invest, there have been seven analyst ratings on the business within the last three months. Two of those analyst ratings were a buy, and five analyst calls were a hold.

A price target tells us where analysts think the share price will be in 12 months from the time of the investment call.

The average price target of those seven analyst ratings is $5.03. Therefore, those analysts collectively suggest that the Medibank share price could rise by more than 10% over the next 12 months.

Combined with the dividend return, the business could be a market beater over the next year.  

The post Is the Medibank share price a buy for its 6% dividend yield? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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.