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Why I think this LIC is a great ASX dividend share

In my opinion, Future Generation Investment Company Ltd (ASX: FGX) is one of the best ASX dividend shares to consider for income seekers.

It’s a listed investment company (LIC) that operates very differently to most other LICs on the market.

It doesn’t charge any management fees or performance fees to investors. Instead, it donates 1% of net tangible assets (NTA) annually to youth focused charities like AIEF, Lighthouse Foundation and Kids Help Line.

The LIC has invested its money into boutique Australian fund managers who focus on ASX shares. These managers are working for free to support Future Generation grow its annual donation to charities. Some of those fund managers include Bennelong, Paradice, Regal, Eley Griffiths, Tribeca and Wilson Asset Management.

The three aims of Future Generation for its shareholders are to achieve capital growth, deliver an increasing stream of fully franked dividends and preserve shareholder capital.

Since inception in September 2014 to December 2018, Future Generation’s portfolio has outperformed the S&P/ASX All Ordinaries Accumulation Index by an average of 2.3% per annum, not including the annual donation.

I believe that Future Generation is a great dividend share for a few different reasons.

If its portfolio outperforms then shareholders get to keep all of the outperformance, there are no performance fees.

The key objective of growing the dividend means it’s likely to occur if there are enough profit reserves each year. Future Generation has grown its dividend each year since 2015 when it started paying a dividend.

It currently has a grossed-up dividend yield of 5.5%, which is solid in this era of low interest rates.

Along with Future Generation, these top ASX dividend shares could also be great choices for income.

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Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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