A particular ASX dividend stock has fallen significantly – down 20% in six months – and now it looks like a great time to buy due to its valuation and dividend yield.
I'm always on the lookout for great dividend opportunities because I like to add the dividend cash flow I receive into my own personal finances.
I recently bought shares in Hearts and Minds Investments Ltd (ASX: HM1) earlier this month when it was trading at around $2.70 and I still think it looks like a wonderful buy today. Let's get into why.
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Great dividend credentials
The ASX dividend stock operates as a listed investment company (LIC), meaning the board of directors have significant control over what size of dividend the company is going to pay to shareholders.
Pleasingly, Hearts & Minds has increased its annual dividend each year since FY23 and has announced guidance that it intends to increase its payout by 0.5 cents every six months for the foreseeable future, subject to there being no sustained period of "investment market underperformance".
The business has provided guidance that it's going to pay an annual dividend per share of 19.5 cents in FY26, which translates into a grossed-up dividend yield of approximately 10%, including franking credits.
If it continues that dividend growth trend, the FY27 payout could become a grossed-up dividend yield of 11%, including franking credits.
A very large and growing dividend is a very attractive feature, in my view.
Great time to invest
ASX LICs make it easy to assess their underlying value by regularly telling investors about the net tangible assets (NTA) per share.
In other words, what are all of the shares and cash that it owns worth on a per-share basis? This can help reveal how much a LIC is really worth.
Hearts & Minds tells investors each week what its NTA is. At 13 March 2026, it had pre-tax NTA of $3.16 – the Hearts & Minds share price is valued at an 11% discount to this.
I think a good LIC trading at a double-digit discount is an attractive prospect for good long-term returns.
Compelling portfolio
The ASX dividend stock's portfolio is not decided by one person or one funds management outfit like most LICs are.
Instead, a significant portion of the portfolio is decided by a continuing group of fund managers, who work for free so that Hearts & Minds can donate 1.5% of its net assets each year to medical research.
Another portion of the portfolio is made up of picks that are pitched at an annual investment conference. The idea is that these 'best picks' from investment professionals are combined in a portfolio that can hopefully perform well. These picks are also free of charge.
Over the three years to 28 February 2026, the Hearts & Minds portfolio delivered an average return per year of 10.8%, which gives it plenty of accounting profit to pay the growing dividend that it is now doing so.
