The ASX dividend share end of the market is a great place to hunt for opportunities that offer compelling passive income. The recent Federal budget changes make capital gains a little less appealing than they were before, compared to dividends. Large dividend yields could be a solution.
Businesses with extremely high dividend yields aren't necessarily the best choices because they could be less reliable or not grow the payout as much as a business with a lower payout, simply because they're keeping more money to invest for growth.
I'm not expecting significant growth of the following two names, but they have demonstrated a track record of dividend stability and long-term payout growth.
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WAM Leaders Ltd (ASX: WLE)
WAM Leaders is a listed investment company (LIC) operated by Wilson Asset Management.
The portfolio is focused towards S&P/ASX 200 Index (ASX: XJO) shares, which are the biggest, strongest and most resilient businesses that have strong market positions and good margins. It's important to note that this is not a passive, index-following portfolio but an active one that buys and sells shares as valuation appeal changes.
Between its inception in May 2016 to May 2026, the WAM Leaders portfolio has returned an average of 12% (before fees, expenses and taxes), outperforming the 9.1% average annual return of the S&P/ASX 200 Accumulation Index (ASX: XJOA).
That level of investment return – which is not guaranteed to continue – has helped the business increase its annual payout every year since FY17. The increases have been small in the last few years because the yield is already so large.
The guided dividend amount for FY26 is 9.6 cents per share, which translates into a grossed-up dividend yield of 10.4%, including franking credits, at the time of writing.
I think the business has a good profit reserve to continue paying the current dividend for the foreseeable future.
Hearts and Minds Investments Ltd (ASX: HM1)
Hearts and Minds is another ASX share with a large dividend yield.
It's a LIC that aims to provide a concentrated portfolio of between 25 and 35 global shares based on the highest-conviction ideas from well-regarded fund managers. There are no management fees, and instead, money is donated to leading Australian medical research organisations.
Close to a third of the portfolio is decided by picks from investment professionals from an annual investment conference. Core, ongoing, portfolio managers decide a greater share of the portfolio.
Since its inception in November 2018, the LIC's portfolio has returned an average of 10.25% after expenses and before Australian taxes.
Its dividend has steadily increased since FY23, and it plans to continue to increase its half-year payout by 0.5 cents every six months.
It plans to pay an annual dividend per share of 19.5 cents in FY26, which translates into a grossed-up dividend yield of 9.8%, though the next 12 months of payments are likely to be a yield of 10.4%, including franking credits.
The business is trading at a discount of around 20% to its pre-tax net tangible assets (NTA), so it looks like great value to me right now.
