Building a second income with ASX shares could be exactly what many Aussies are looking to do.
We can only generate so much in earnings when we work for money. It's owning assets that help unlock that next phase of income creation.
I like to think of the ASX share market as the ASX business market – we can invest in great companies that are doing their best to make money for us, including paying dividends.
I'm using the three names below to build a second income for my own finances, and I want to highlight them for anyone wanting to build a second income with dividends.
MFF Capital Investments Ltd (ASX: MFF)
There are not many ASX investments that offer investors exposure to some of the world's best businesses and have a good dividend yield.
Companies are allowed to declare the size of dividend they want to, as long as they have the accounting profit reserve for it. That's one of the main reasons why investment businesses – namely listed investment companies (LICs) – can provide such consistent passive income for investors. The years of good investment profits can pay for ongoing dividends even when share markets are weak.
MFF has grown its normal annual dividend per share every year over the past several years. It owns some of the best global tech stocks, payment giants and other businesses with compelling futures in its portfolio.
I like the flexibility that the ASX share can invest in any business on the ASX or globally, which should help create good investment returns. I'm expecting its grossed-up dividend yield for FY26 to be at least 6%, including franking credits, at the time of writing's valuation. That's a great start for a second income.
L1 Long Short Fund Ltd (ASX: LSF)
This is another LIC – it invests in both ASX shares and global shares, utilising normal investing and short-selling strategies. L1 Long Short Fund typically looks to invest in undervalued businesses with relatively low price/earnings (P/E) ratios.
Past performance is not a guarantee of future performance. I think that disclaimer is particularly relevant when it comes to looking at the LIC's investment performance. Over the past five years, its portfolio's average annual net return was 18%.
That level of return is enough for the ASX share to provide growing dividends and capital growth.
Its payout has increased each year since 2021 and its latest quarterly dividend translates into a grossed-up dividend yield of 4.6%, including franking credits, at the time of writing. That's a solid yield for building a second income.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
This business isn't strictly a LIC, but it is a listed company that generates a lot of earnings through investing.
It's an investment house that invests in a wide range of listed businesses, as well as owning private businesses.
Soul Patts has private investments in industrial property, building products, agriculture, swimming schools, electrification, retirement living, water rights and financial services.
The company has investments in ASX shares like New Hope Corporation Ltd (ASX: NHC), Tuas Ltd (ASX: TUA), TPG Telecom Ltd (ASX: TPG), Electro Optic Systems Holdings Ltd (ASX: EOS), Aeris Resources Ltd (ASX: AIS) and Nexgen Energy (Canada) CDI (ASX: NXG).
By utilising the cash flow of the dividend payments from its investment portfolio, Soul Patts is able to pay a growing dividend and invest in new opportunities for the portfolio.
Soul Patts has increased its annual dividend every year since 1998. That's a wonderful record and the company wants to keep going for the foreseeable future, making it a wonderful pick for a second income.
I predict its grossed-up dividend yield in FY26 will be at least 4%, including franking credits, at the time of writing.
