3 of the best ASX dividend shares I own for passive income

These ASX dividend shares are my three biggest holdings because…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

My portfolio is heavily weighted towards ASX dividend shares that can provide a mixture of dividends and capital growth. I like both types of returns because I can become wealthier over time through a rising portfolio value, while experiencing larger dividend payouts and benefiting my bank account. That cash can be put towards more shares or life expenses.

The three ASX dividend shares I'm going to highlight have a track record of growing their payouts, and I expect further growth in the coming years.

A heart next to a pink piggy bank and coins.

Image source: Getty Images

MFF Capital Investments Ltd (ASX: MFF)

MFF Capital is best known as a listed investment company (LIC), though it recently acquired a funds management business, giving it an operational element.

The ASX dividend share has a portfolio focused on strong, global businesses with great competitive advantages and has the potential to grow profits in the long term. Its biggest positions are currently Alphabet, Amazon, Mastercard, and Visa.

Its high-quality portfolio picks have led the MFF portfolio to deliver strong investment returns over the last 5, 10, and 15 years. This has allowed the business to build an impressive profit reserve, allowing it to pay large and growing dividends.

The company's regular annual dividend has increased each year since FY18, and it expects to grow its annual dividend in FY26 by 23.5% to 21 cents per share. That's a current grossed-up dividend yield of 5.9%, including franking credits.

Washington H. Soul Pattinson and Co Ltd (ASX: SOL)

Soul Patts is another impressive investment business that has been listed for more than 120 years.

The investment house has a portfolio spread across a variety of assets that are largely uncorrelated and can provide Soul Patts with defensive, diversified cash flow, which funds Soul Patts' impressive and growing dividends.

The ASX dividend share's portfolio includes investments across energy, resources, property, swimming schools, agriculture, water entitlements, electrification, credit, financial services, building products, and plenty more.

How good are the dividends? It's the reliability and consistent growth that attracted me. Its regular annual payout has been hiked every year since 1998. That's the longest record of consecutive dividend growth on the ASX.

It currently has a grossed-up dividend yield of 3.4%, including franking credits.

L1 Long Short Fund Ltd (ASX: LSF)

This business is another LIC in my portfolio. The ASX dividend share invests quite differently compared to a typical fund manager. It invests in both ASX and international shares through both long-term investing and short selling.

The ASX dividend share likes to invest in businesses with low price-to-earnings (P/E) ratios and still deliver good earnings growth. I think the investment team have shown a particular skill at investing at the right times in cyclical and commodity-based businesses.

Past performance is not a guarantee of future returns, of course, but the L1 Long Short Fund's portfolio return has helped it increase its dividend regularly over the last few years. The portfolio has returned an average of 17% per year over the last five years, though that's not guaranteed to continue for the next five years.

It's now paying a quarterly dividend and increasing that payment every quarter. I expect the next four quarterly dividends will come to a grossed-up dividend yield of 4.9%, including franking credits.

I highly rate these three ASX dividend shares, and I expect to continue buying more shares in them in the coming years.

Motley Fool contributor Tristan Harrison has positions in L1 Long Short Fund, Mff Capital Investments, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Mastercard, Visa, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Mff Capital Investments and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Alphabet, Amazon, Mastercard, and Visa. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Dividend Investing

Friend enjoying a meal at a restaurant, symbolising passive income.
Dividend Investing

I'd buy 4,068 shares of this ASX stock to aim for $200 a month of passive income

This business offers investors pleasing and resilient payouts.

Read more »

Man holding out Australian dollar notes, symbolising dividends.
Dividend Investing

How much do I need in my superannuation to earn an annual $60,000 passive income?

Earning a consistent passive income off your superannuation is easier than you'd think.

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Dividend Investing

Brokers name 2 ASX dividend shares to buy with 4% to 7% yields

Attractive dividend yields are forecast from these shares.

Read more »

Australian dollar notes in the pocket of a man's jeans, symbolising dividends.
Dividend Investing

This ASX dividend stock could pay me $1,000 this year. Here's how many shares I'd need

The yield on this stock might surprise you.

Read more »

Two people lazing in deck chairs on a beautiful sandy beach throw their hands up in the air.
Dividend Investing

3 ASX dividend shares I'd buy for passive income right now

Which ASX dividend shares should I include in my portfolio?

Read more »

Person handing out $100 notes, symbolising ex-dividend date.
Best Shares

1 ASX dividend stock down 18% I'd buy today!

This ASX dividend stock crashed through 2022 to 2025. But it looks like it has turned a corner this year.

Read more »

Australian dollar notes in the pocket of a man's jeans, symbolising dividends.
Dividend Investing

Is this beaten-down ASX software stock hiding a dividend winner?

A growing global business may be hiding behind the market’s pessimism.

Read more »

A disabled senior man in wheelchair playing with a pet dog at home.
Dividend Investing

How to invest $15,000 for passive income in retirement

These investments offer significant and reliable passive income.

Read more »