It's a great joy to own ASX dividend shares that deliver passive income for our bank accounts. I think it's even more appealing to own businesses that have a habit of growing the payout each year.
It's especially pleasing to see the payment increase each year. This enables us to become wealthier, offset/exceed inflation, as well as signalling that the business isn't hitting shareholders with a cut.
If we're relying on dividend income to pay for our life, it could be a disaster if an ASX dividend share were to enact a cut. That's why I've put a lot of my own money towards the two names below, and I still think they're buys today.
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Washington H. Soul Pattinson and Co Ltd (ASX: SOL)
The leading ASX business for dividend increases is Soul Patts, in my view.
While the investment house hasn't delivered the biggest dividend increases over the past decade or two, it has certainly been the most consistent.
It has increased its annual dividend every year since 1998, which is a longer streak than any other ASX share.
It's invested in a number of sectors including telecommunications, resources, agriculture, industrial properties, building products, swimming schools, credit and more.
By having a diversified portfolio, it's able to lower the risks and find the best opportunities in a wide array of industries.
The ASX dividend share is able to regularly grow the passive dividend income because it generates investment cash flow from its portfolio, it pays for its expenses and then sends a majority of that net cash flow to shareholders. It retains some of the money to invest in more opportunities each year.
The company has a grossed-up dividend yield of 3.9%, including franking credits. But, with its record of rising payouts, I'm expecting the FY26 grossed-up dividend yield to be at least 4.1%, at the current valuation.
L1 Long Short Fund Ltd (ASX: LSF)
I like the listed investment company (LIC) structure for receiving stable and growing income because of how LICs can use investment gains in the latest and previous financial years, enabling a smooth and steadily rising payout due to the profit reserve.
The L1 Long Short Fund provides investors with access to a fund that aims to produce positive returns regardless of what share markets are doing. It achieves this by investing in businesses it thinks are undervalued, as well as shorting businesses it thinks will fall. The company's investment objective is to deliver strong, positive, risk-adjusted returns over the long term whilst seeking to preserve shareholder capital.
The ASX dividend share has steadily increased its passive income each year since it started paying dividends in 2021. It recently announced a shift to a quarterly dividend of 3.5 cents per share. Annualised, that represents an increase of at least 9.8% year-over-year, assuming no increases to the quarterly payout.
If it does pay 14 cents per share in FY26, that'd be a grossed-up dividend yield of 4.7%, including franking credits.
