Earlier this week, we looked at the impressive dividend yield that ASX 200 iron ore giant Fortescue Ltd (ASX: FMG) shares are currently boasting.
Fortescue's ASX dividend yield is presently trading well north of 9% – 9.66%, to be exact, as of the current stock price.
Now, that's obviously a great dividend yield to have in one's ASX share portfolio. But, as we also noted earlier this week, that dividend is fundamentally unreliable, given Fortescue's nature as a seller of a raw commodity over which it has no pricing power.
Fortescue is not a bad company. I myself would probably own it if maximising passive dividend income was the primary goal of my investing strategy. But there's another ASX dividend machine that I prefer to own today instead.
That dividend machine is a listed investment company (LIC) by the name of MFF Capital Investments Ltd (ASX: MFF).
An LIC is a company that usually invests in a portfolio of other underlying assets, which it manages on behalf of its shareholders. MFF is no different, with this LIC specialising in holding US stocks. Those US stocks are selected by MFF's chief investment officer Chris Mackay, who was a co-founder of Magellan Financial Group Ltd (ASX: MFG).
Mackay is a dyed-in-the-wool disciple of Warren Buffett and attempts to emulate Buffett's style of investing, which involves buying the highest-quality companies on the market at attractive prices and holding them for long periods of time (preferably forever).
Some of MFF's longstanding portfolio staples include Amazon, Visa, Mastercard, Google-owner Alphabet, American Express and Bank of America.
Mackay's approach has worked very well for MFF in recent years, with the company's shares up around 60% since July of 2022.
But let's talk about dividends.
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MFF: An ASX dividend machine
MFF has prioritised raising its ASX dividend over the past few years and has raised its annual shareholder payouts every year since 2018.
Back then, MFF shares yielded an annual ASX dividend of 3 cents per share. But by 2023, this had risen to 9.5 cents. This year's interim dividend of 6 cents per share, paid out in May, was a big increase over the 2023 interim dividend of 4.5 cents per share.
Further, the company recently revealed that it intends to pay out a final dividend of 7 cents per share later this year. That would take its 2024 total to 13 cents per share. If this turns out to be the case, it would mean that MFF's annual dividend would have risen 333% between 2018 and 2024.
That's why I view this company as a dividend income machine and why it, and not Fortescue, occupies a large portion of my overall ASX share portfolio.
At the current MFF Captial share price of $3.70, this LIC offers a trailing ASX dividend yield of 2.57%, which also comes with full franking credits attached. If the company does indeed pay out 7 cents per share later this year, it would have a forward dividend yield of 3.51%.
