The ASX dividend share L1 Long Short Fund Ltd (ASX: LSF) may be one of the leading picks for retiree passive income on the ASX.
Retirees may be searching for investments that can offer multiple positives such as a good dividend yield, dividend growth, capital growth and even diversification.
There are some investments that can provide instant diversification such as exchange-traded funds (ETFs). I reckon listed investment companies (LICs), with investment picks chosen by fund managers, are a very underrated option and I believe L1 Long Short Fund can tick all of those boxes.
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Diversification
L1 Long Short Fund invests in a mixture of Australian shares and international shares, through a mixture of both long-term investing and short-selling. Short investing is when an investor thinks a share price is going to go down.
Therefore, the LIC is able to make returns whether the market is going up or down. It certainly doesn't follow an index like the S&P/ASX 200 Index (ASX: XJO), that's for sure, though it does aim to outperform the ASX 200.
Its typical investment strategy is to aim for businesses with low price/earnings (P/E) ratios, but are expected to deliver solid earnings per share (EPS) growth (with modest debt levels).
Since the start of its long-short strategy, the three sectors that have contributed the most to returns have been ASX mining shares, industrials and communication shares. It has not relied on tech for returns at all.
Dividend yield
With the investment returns generated by the LIC, it can provide a pleasing dividend yield for retirees (and shareholders of other ages).
I expect the next four quarterly dividends will come to 15.4 cents, which translates into a potential grossed-up dividend yield of 5%, including franking credits, at the time of writing.
I believe investors can look forward to the dividend yield growing further (if the L1 Long Short Fund share price weren't to change).
Dividend growth
The leadership of the ASX dividend share has stated that it intends to continue increasing the dividend for shareholders, and the payout has increased each financial year since 2021, when it first started paying a dividend.
At a time when inflation is elevated, I think it's a good idea to look for investments that are increasing their passive income payments.
The two FY26 first half's quarterly dividends were 13.6% higher than the FY25 first-half interim dividend, which is a solid growth rate.
I think the business can continue to hike its quarterly dividend at a year-over-year growth rate of more than 10% in 2026.
Capital growth
Over the last five years, the ASX dividend share's portfolio has delivered a net return of 16.3% per year, close to doubling its benchmark. Past performance is not a guarantee of future returns, of course.
But, with a return of that size, L1 Long Short Fund has been able to deliver a sizeable dividend and dividend growth, with capital growth from the retained investment profits.
For retirees, I think the LIC is a very attractive.
