I still think ASX dividend shares are the best way to generate passive income, despite interest rates going higher. Yes, money in a savings account (or term deposit) is safer. However, if I'm not saving for a specific goal, I'd want to invest in the stock market with a good dividend yield for passive income.
Businesses can offer a good dividend yield, but it's the potential for organic capital and dividend growth that puts them ahead of a term deposit, in my view.
There are plenty of great ASX dividend shares with yields below 8%, so we don't necessarily need to choose only high-yielding ideas, but this article is about those with exceptionally high yields, like the two below.
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WAM Leaders Ltd (ASX: WLE)
WAM Leaders is one of the largest listed investment companies (LICs) on the ASX. Its goal is to actively invest in large, high-quality businesses on the ASX.
At the end of April, some of its largest positions were names like Wesfarmers Ltd (ASX: WES), Rio Tinto Ltd (ASX: RIO), REA Group Ltd (ASX: REA), National Australia Bank Ltd (ASX: NAB), Macquarie Group Ltd (ASX: MQG), Goodman Group (ASX: GMG), BHP Group Ltd (ASX: BHP), and Alcoa Corporation (ASX: AAI).
As a LIC, the business is able to turn profits from investment returns generated into paying dividends.
Its solid investment returns have enabled the business to steadily increase its dividend each year since FY17, a pleasing record of consistency.
Its investment returns, before fees, expenses, and taxes, have averaged 11.9% per year since inception in May 2016. That's almost 3% per year better than its benchmark, though past outperformance is not a guarantee it will continue to deliver future outperformance.
It expects to pay an annual dividend per share of 9.6 cents in FY26, translating into a grossed-up dividend yield of 10.5%, including franking credits. It's one of the few ASX dividend shares with a double-digit yield that I'd be willing to buy, and I expect it can continue to slightly increase the dividend each year.
Shaver Shop Group Ltd (ASX: SSG)
Shaver Shop is an ASX retail share that sells a variety of hair removal products, including a number of exclusive products from high-quality brands. It also has its own brand called Transform-U.
Impressively, the business started paying a dividend in 2017 and hasn't cut its payout since, despite various wider financial impacts during that period.
It has increased its dividend every year, except FY24, when it maintained the dividend. We'll see what it pays in FY26.
The ASX dividend share's latest two half-year dividends come to 10.3 cents per share. That translates into a grossed-up dividend yield of 11.3%, including franking credits.
Shaver Shop is doing its best to continue growing profits and hiking its dividend. Its plans include opening more stores across Australia and New Zealand, expanding its Transform-U product range, selling more online, and perhaps working with additional shaver brands.
According to the forecast on CMC Invest, the Shaver Shop share price is valued at 11 times FY26's estimated earnings.
