Commonwealth Bank of Australia (ASX: CBA) shares have been an excellent choice for passive income, but I think there are other better ASX dividend shares these days.
The ASX bank share faces a number of headwinds including changes to negative gearing and capital gains tax (CGT), higher interest rates and growing competition from Macquarie Group Ltd (ASX: MQG).
Its relatively high price/earnings (P/E) ratio means CBA doesn't have a particularly attractive dividend yield these days, and all of the headwinds could keep dividend growth at a very slow rate for the foreseeable future.
For me, the following two ASX dividend shares are much more attractive for multiple reasons than CBA shares.
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Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is arguably the best ASX dividend share in terms of dividend growth. Its regular dividend has increased every year since 1998; we're approaching three decades of dividend growth!
Perhaps even more impressively, it has paid a dividend every year for more than 120 years, including through the world wars, the pandemics, the recessions and politicians.
It has managed this by having a diversified portfolio of investments – it's not stuck being a bank or being invested in any particular industry.
It regularly makes investments and occasionally sells holdings too. That ability to adjust the portfolio over time helps future-proof the company – I think it'll be just as compelling in 10 years as it is today, even if the holdings change.
Currently, some of the ASX dividend share's biggest investments include energy, property, swimming schools, agriculture and credit.
With how the business usually retains a sizeable portion of its cash flow each year, it doesn't usually have a big dividend yield. But, that reinvested money can help long-term growth of the Soul Patts share price and its dividend.
In the FY26 half-year result, Soul Patts reported that its dividend had increased at 5-year compound annual growth rate (CAGR) of 11.9%. I expect it can achieve close to 10% growth of the dividend in the next few years, which is likely to be much better than CBA's dividend growth.
It currently has a grossed-up dividend yield of 3.3%, including franking credits.
WCM Global Growth Ltd (ASX: WQG)
I'd imagine plenty of investors with large CBA shareholdings may be overexposed to the Australian economy. I think Australia is a great country, but it's a relatively small part of the global picture, so it's worthwhile having investments that give exposure to other markets.
I would describe WCM Global Growth as one of the most effective choices for the joint goal of passive income and international (growth) exposure.
The listed investment structure (LIC) is very useful to help turn investment returns into reliable dividend payouts because the board of directors gets to decide what to do with the profit generated.
The ASX dividend share invests in a portfolio of between 20 and 40 high-quality stocks that come from across the Americas, Europe and Asia Pacific. These are typically businesses that have improving economic moats, which makes it very easy to deliver market-beating returns.
The WCM Global Growth portfolio has delivered a net return of 15.8% per year since its inception in June 2017.
It has increased its annual dividend per share each year since 2019, started paying a quarterly dividend in 2023 and has increased its quarterly dividend every quarter since then.
Its next four quarterly dividends are expected to total a grossed-up dividend yield of 7.1%, including franking credits. That's a much better yield than what CBA shares can provide, in my view.
