The ASX dividend stock MFF Capital Investments Ltd (ASX: MFF) is one of my preferred picks for passive income right now.
There are multiple reasons why I like this company, which has spent most of its life as a pure listed investment company (LIC). It recently acquired the funds management business Montaka, which offers three independently operated funds with total funds under management (FUM) of $350 million.
Owning Montaka gives MFF Capital Investments access to additional portfolio managers and research, diversifying the key-person risk associated with relying solely on managing director Chris Mackay.
With this deal, MFF now has an operating business side as well, but most of the value is tied up in its international share portfolio. I'll get to the merits of that in a minute, but first, let's talk about the dividend.
Pleasing payout
This ASX dividend stock has grown its annual regular dividend each year since 2018. Its pleasing long-term investment gains have enabled MFF Capital to build up a large profit reserve so it can continue paying dividends to shareholders even in a weak share market.
MFF has indicated it intends to pay an annual dividend per share of 16 cents in FY25, which currently translates into a dividend yield of 3.3% and a grossed-up dividend yield of 4.7%, including franking credits.
While that's not the highest yield around, I think this ASX dividend stock finds the right balance between rewarding shareholders and retaining profit/cash to deliver further returns.
Diversified portfolio
There are plenty of great investments on the ASX, but I think it's a good idea for me and other Aussie investors to diversify by getting exposure to international shares.
MFF Capital can invest anywhere in the world to buy positions for the portfolio, so it is very flexible in finding the best opportunities.
The company has a fairly concentrated portfolio, so if one of the stock picks does well, then MFF should materially benefit. At the end of January, the following positions had a weighting of more than 5%: Alphabet, Amazon, Mastercard, Visa, Meta Platforms, American Express, Bank of America, Home Depot and Microsoft. I think these are some of the best companies in the world, leading change in various aspects of our lives.
MFF is a great investment for investors who want global share exposure and passive income from an ASX dividend stock.
Good valuation
One of the benefits of investing in LICs is that you can buy the share price for cheaper than the net tangible assets (NTA – the underlying value) per share value.
MFF tells investors what its NTA is each week. At 7 February 2025, the pre-tax NTA was $5.28, so MFF is trading at a decent discount to this.
I like being able to buy great investments at a cheaper price than they're worth, which is why I decided to buy a parcel of shares earlier this week.
