ASX dividend shares are some of my favourite investments in my portfolio because they provide a mix of passive income and long-term growth.
I own a mixture of ASX dividend shares, ASX growth shares and exchange-traded funds (ETFs) for a variety of investment purposes.
One of the businesses that I've made among my biggest positions is L1 Long Short Fund Ltd (ASX: LSF).
For me, there are three key reasons that I really like the listed investment company (LIC).
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Good and growing passive income
The LIC has an impressive track record of delivering consistent dividend growth.
It has increased its annual payout each year since it started paying in FY21. The business recently changed to paying a quarterly dividend and it has been increasing its dividend every quarter.
If it continues growing its quarterly dividend at a similar pace, the next four dividends would come to a grossed-up dividend yield of 4.9%, including franking credits, at the time of writing.
I think that's a solid starting point, with plenty of room for further dividend growth as a result of strong investment performance. I expect the November 2026 quarterly dividend to be 11.4% larger than the November 2025 quarterly dividend.
Strong investment performance
A LIC funds its dividends from the investment performance of its portfolio. With the ASX dividend share's excellent long-term performance, it can continue paying pleasing passive income and funding growing payouts.
The performance has been so good that it has been able to deliver excellent capital growth too. In the past eight years, the L1 Long Short Fund share price has risen close to 130%.
The LIC targets a mixture of both ASX shares and international shares, through both normal investing and short-selling. Through that strategy, it's able to utilise both good value and expensive shares, locally and globally, to its advantage.
In the past five years, the L1 Long Short Fund portfolio has returned an average of 17% (net) per year. That's a great return, in my opinion! Of course, past performance is not a guarantee of future performance.
Diversification
One of the best reasons I like this business is how it generates returns. It hasn't relied on technology businesses due to how it invests – it's more likely to short a tech stock than invest in it for the long-term.
Instead, it looks at opportunities in other areas such as gold shares, copper shares, industrials and telecommunications. In other words, the 'real' economy.
You can make good returns in almost any business, including cyclical ones, if bought at the right price. So, by investing in this ASX dividend share, I'm getting exposure to companies and sectors I don't in other parts of my portfolio.
But, this isn't the only ASX dividend share I want to buy for my portfolio.
