I'm a big advocate of ASX dividend shares that can provide investors with a pleasing passive income combination of dividend yield, reliability and regular growth.
I wouldn't call a business an ASX dividend share just because it pays any sort of dividend. I believe it needs to have a minimum level of a dividend yield. My thought on the base level required can change depending on where the RBA cash rate is sitting. The five investments I'll highlight all have a pleasing dividend yield.
I'd also like to see reliability in terms of those payments. I'd like to be confident that payments will continue flowing even if the economy runs into trouble.
Finally, I like to see regular dividend growth to help grow cash flow and protect against the negatives of inflation.
I believe all five of the below businesses match what I'm looking for, which is why I own all five of them for passive income (and long-term capital growth).
Image source: Getty Images
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts has the best record for dividend growth – it has grown its payout every year since 1998. At the time of writing, the ASX dividend share has a grossed-up dividend yield of 3.9%, including franking credits.
It's an investment conglomerate which is steadily building its portfolio of assets and businesses. Its biggest investments are in areas like telecommunications, resources, industrial properties, building products, swimming schools and agriculture.
MFF Capital Investments Ltd (ASX: MFF)
MFF's main activity is its impressive investment portfolio focused on international shares, with several of the strongest global blue chips. I'm optimistic the portfolio (and future investment changes) can deliver pleasing long-term returns.
The company has grown its annual ordinary payout each year since 2018 and it has a large profit reserve to enable further dividend payments in the coming years.
Its guided FY26 dividends equate to a grossed-up dividend yield of at least 6.1%, including franking credits.
Future Generation Australia Ltd (ASX: FGX)
This is a listed investment company (LIC) which invests in an array of funds focused on ASX shares. But, those fund managers work for free so that Future Generation can donate 1% of its net assets each year to youth-focused charities. I like the initiative and the diversification on offer.
The ASX dividend share has grown its annual dividend each year since it started paying one in 2015. It has grossed-up dividend yield of 7.4%, including franking credits, at the time of writing.
Rivco Australia Ltd (ASX: D2O)
Rivco Australia, recently renamed from Duxton Water, owns a portfolio of water entitlements which is available for irrigators on short-term or long-term leases.
The business can benefit from both the lease income and the growth in the value of water entitlements over the long-term.
The ASX dividend share has increased its half-yearly dividend every year since 2017. It has a grossed-up dividend yield of 6.9%, including franking credits, at the time of writing.
I like the exposure that Rivco provides to the agricultural sector but with less volatility.
Rural Funds Group (ASX: RFF)
Rural Funds is a real estate investment trust (REIT) that owns a portfolio of arms across Australia, including cattle, almonds, macadamias and vineyards.
Its rental income is benefiting from regular rental hikes that are either linked to inflation or grow with fixed annual increases.
It grew its distribution every year between 2014 and 2022, then maintained the payout since. I'm expecting distribution growth in the medium-term following RBA rate decreases.
It's trading at a large discount to its underlying net asset value (NAV) and has a distribution yield of 6%.
