Many investors who love a good ASX dividend own shares of the mining giant BHP Group Ltd (ASX: BHP) for that very reason. Over recent years, BHP has proven its chops to ASX investors, spewing out monstrous record dividend payments to its investors.
Today (at the time of writing anyway), the mining heavyweight trades on an attractive (and fully franked) ASX dividend yield of 5.22%.
I love a good ASX dividend, especially if it's fully franked, as much as the next investor. However, I'm not buying this miner anytime soon. Regardless of its lucrative track record as a passive income payer.
BHP does have the capacity to pay hefty ASX dividends. But those dividends are entirely dependent on the health of the commodities markets at the time. As such, they tend to be highly cyclical, following a 'feast-and-famine' pattern. To illustrate, the company forked out an annual total of $1.59 in dividends per share in 2018, $4.63 in 2022, and then $2.21 in 2024.
That might be fine for retirees and those currently living off dividend income. But for my own portfolio, I prefer to invest in companies that have the capacity to grow their earnings and dividends consistently over time rather than companies whose earnings (and dividends) are hostage to the price of the commodities they mine.
That's why I'd prefer to buy shares of MFF Capital Investments Ltd (ASX: MFF) today for dividends over those of BHP.
Why would I buy this ASX dividend giant over BHP shares today?
MFF Capital is a listed investment company (LIC) that has been on the ASX for many years now. As an LIC, it doesn't function like a traditional ASX dividend share. Instead of producing and selling a product, MFF invests in a portfolio of other assets on behalf of its shareholders.
In this case, its portfolio consists mostly of high-quality American shares. MFF boss Chris Mackay is a Warren Buffett-style investor who likes to buy shares of quality companies at compelling prices. These stocks are then retained as long-term investments.
Some of MFF's longest-held positions include Visa, Mastercard, Home Depot, Amazon and Google-owner Alphabet.
MFF has delivered some healthy capital gains of late, with its share price up more than 33% over the past 12 months. But it's this company's ASX dividend track record that has me excited about holding this stock going forward.
MFF has been dialling up its ASX dividends with gusto in recent years. It has delivered an annual dividend pay rise every single year since 2018. Back in that year, investors bagged a total of 3 cents per share in dividends. But in 2024, that had risen to 13 cents. MFF has guided that it intends to pay out even higher dividends next year as well.
Today, MFF shares trade on a dividend yield of around 3.3% (which comes fully franked). But thanks to my purchases being made at a far lower price, I'm fortunate enough to enjoy a much higher yield-on-cost on the shares I already own. That won't stop me from buying more of this ASX dividend giant (at the expense of BHP shares) going forward.
