ASX shares are a wonderful tool to unlock a significant dividend yield because of a combination of a generous dividend payout ratio and an attractive valuation.
Investors wanting to grow wealth relatively quickly may not necessarily want high levels of passive income because that could mean paying more of the return to the Australian Taxation Office. Capital gains aren't taxed until an asset is sold.
However, for investors in retirement or who have a low tax rate, ASX dividend shares with a large dividend yield could be a rewarding pick.
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Hearts and Minds Investments Ltd (ASX: HM1)
This is one of the high-yield ASX shares that I've added to my own portfolio because of the investment exposure and high levels of passive income.
It's a listed investment company (LIC), meaning it doesn't sell products or services. Instead, the business has an investment portfolio that it aims to make investment returns with.
Dividends are paid from the positive investment returns, which allows it to pay steadily growing passive income. The company is aiming to increase its payout every six months by 0.5 cents per share.
The next two dividends to be declared should come to a total of 20.5 cents per share, which would translate into a grossed-up dividend yield of 10.3%, including franking credits.
Hearts & Minds donates 1.5% of its portfolio to medical research, it's able to do that because all of the investment picks are contributed for free by investment experts.
Some of the portfolio is decided by a core group of portfolio managers, while the rest is contributed at an annual investment conference, where some experts pick their best stock idea.
This process results in a largely global portfolio and the recent volatility could mean it's a compelling time to invest.
Shaver Shop Group Ltd (ASX: SSG)
Shaver Shop is a leading ASX retail share that sells a variety of hair removal products. Considering how important hair removal is for many Australians, I think the business has relatively defensive earnings for a retailer.
The business has benefited from the steady growth of its store network, as well as the expansion of its own brand called Transform-U. Building its own brand can come with higher gross profit margin and stronger control of what products it sells.
But, the ASX dividend share also has a number of exclusive products from quality shaving brands, giving it a unique selling point (USP) for customers.
Pleasingly, the business has grown or maintained its dividend every year since 2017, so we're almost at a decade of dividend reliability.
The last two half-year dividends come to a grossed-up dividend yield of close to 11%, including franking credits.
