The ASX dividend share space has a number of interesting businesses that can provide a mixture of pleasing passive income and potential capital growth.
I like the idea of investing in companies that are capable of growing profit or underlying value at a pleasing pace. But, it'd also be useful if those companies are diversified in different sectors so they have more opportunities to grow and aren't exposed to just one sector (such as banking). A name like Wesfarmers Ltd (ASX: WES) comes to mind as an example.
However, there are two other businesses I want to highlight today, which could deliver excellent growth in the coming years. I've made them two of my largest holdings.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Since 2000, this investment conglomerate has grown its annual ordinary dividend at a compound annual growth rate (CAGR) of 9.8%, excluding $1.05 in special dividends. In the last three years, it has grown its annual dividend at a CAGR of 15.1%.
Past dividend growth is not a guarantee of future dividend growth, but I think there's a decent chance the company may be able to grow its annual dividend by close to 10% per year. Indeed, the company grew its FY25 half-year dividend by 10% while still retaining a large minority of its cash flow to invest in further opportunities.
This ASX dividend share has a current grossed-up dividend yield of 4.1%, including franking credits. I think it's possible the grossed-up dividend yield could grow to around 10% in 10 years' time, at the current Soul Patts share price, if it's able to grow the dividend by approximately 10% per annum.
I like that the business is invested in growing ASX shares and private businesses. Some of its private businesses are developing at a good rate. For example, in the last three years, the operating profit (EBITDA) has grown at a CAGR of 13% for Ampcontrol, 63% for Aquatic Achievers, and 42% for Ironbark.
Soul Patts is also invested in ASX shares that could grow profit significantly in the next few years, such as Tuas Ltd (ASX: TUA) and Nexgen Energy (Canada) CDI (ASX: NXG). The ongoing expansion of the ASX dividend share's portfolio through new investments can help expand its growth runway, too.
MFF Capital Investments Ltd (ASX: MFF)
MFF is the other business I want to talk about. MFF spent most of its life as a pure listed investment company (LIC) focused on international shares.
However, it recently bought a funds management business called Montaka. This added an operational element to the ASX dividend share, but it also added multiple investment professionals to the business, reducing key-person risk and adding stock-picking capabilities.
MFF has been steadily growing the ordinary dividend for shareholders since 2018. Continuing the dividend growth is helping unlock franking credits.
On the dividend side, it expects to grow its annual dividend per share by 23% in FY25. I'm not expecting that level of dividend growth to continue forever. But I believe the pace of dividend rises in the next decade could mean MFF shares also offer a grossed-up dividend yield of at least 10% ten years from now (at the current MFF share price).
With the potential for good investment returns from its global share portfolio and helpful growth of Montaka's operating profits, I think the future looks bright for this ASX dividend share. As of 21 March 2025, it's currently trading at a 12% discount to the pre-tax net tangible assets (NTA).
