Building a second income with ASX shares is a very attractive option because of how it can bolster our total income with virtually no extra effort. For many people's jobs, you need to work more hours to increase earnings.
What sorts of ASX shares would make good investments for this objective? I'd go for businesses that have a clear objective to pay and grow dividends for shareholders.
I think there are a few names that are very appealing because of how they're set up.
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Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
This is my favourite ASX share option for a second income because of its commitment to increasing payouts.
It's the business with the longest record of dividend growth on the ASX – it has increased its regular annual payout each year since 1998, which is a great record of stability.
The business is an investment house that has been operating for over 120 years and has paid a dividend every year during that period, through wars, pandemics, recessions, and so on.
It has built its portfolio to include a range of sectors, including resources, telecommunications, agriculture, water entitlements, energy, swimming schools, financial services, industrial property, credit, and much more.
Soul Patts has invested in numerous assets that can deliver earnings growth and enhance the portfolio's underlying value. That's a powerful combination for long-term investors who want income. The ASX share receives cash flow from its portfolio in the form of dividends, distributions and interest, which it uses to pay its own expenses, deliver a growing dividend and reinvest the rest in other opportunities for its portfolio.
Since 1998, the company's ordinary dividend has increased at a compound annual growth rate (CAGR) of 10.5% (excluding $1.09 per share of special dividends). That's a strong growth rate for building a second income.
At the time of writing, Soul Patts has a grossed-up dividend yield of 3.75%, including franking credits.
PM Capital Global Opportunities Fund Ltd (ASX: PGF)
This is a listed investment company (LIC) that focuses on international shares to build a diversified and strong-performing portfolio.
LICs are great options for dividends because it's up to the board of directors to decide the level of payment, which can be useful for a stable, growing second income.
But this LIC doesn't usually invest in tech giants, which means we get different investment exposure than other typical internationally focused exchange-traded funds (ETFs) (and LICs).
PM Capital Global Opportunities Fund is invested in areas like European banking, resources, healthcare, industrials, US banks, leisure and entertainment, consumer staples, Irish and Spanish housing, and more. It's an interesting mix of investments,
The LIC has performed strongly – in the last seven years, its portfolio has returned an average of 21% per year. But, past performance is not a guarantee of future returns.
The strength of the performance over the years has enabled the LIC to steadily increase its payout – dividends are paid from investment returns. Impressively, it grew its FY26 half-year payout by 27%. Since 2016, FY23 was the only year it didn't increase its payout (when it was maintained).
It expects to pay an annual dividend per share of at least 13.5 cents in FY26, which translates into a grossed-up dividend yield of 6.5% at the time of writing, including franking credits. That's a solid starting yield for building a second income, in my eyes.
