The ASX share market is a wonderful place to find investments that can offer huge passive income. There are a few businesses that offer a dividend yield of more than 10%, which I think can be very compelling.
But there are only a few businesses I'd consider as contenders for buys, given that high dividend yields aren't necessarily reliable for payouts – some may be in danger of giving investors a significant dividend reduction.
I think the below two ideas can provide investors with a very good dividend yield for the foreseeable future.
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Hearts and Minds Investments Ltd (ASX: HM1)
This is a listed investment company (LIC) that has a number of fund managers and investment professionals who contribute investment picks for free. Some of the fund managers are core managers who provide continuing portfolio picks, while a minority of the portfolio is based on picks at an annual investment conference.
The portfolio is full of international shares, so Australian investors are getting diversification with this investment, while also getting an incredible dividend yield.
Hearts and Minds has indicated an intention to increase its half-yearly dividend by 0.5 cents per share. That means the business could pay an annual dividend per share of 20.5 cents in the next 12 months. At the time of writing, that translates into a grossed-up dividend yield of 9.8%, including franking credits.
Its portfolio has returned an average of 10.25% per annum since inception in November 2018 – that's high enough to pay a good dividend.
Centuria Office REIT (ASX: COF)
Another ASX share that could be undervalued is this real estate investment trust (REIT) which owns office buildings across a number of markets, giving it diversification.
The business is certainly facing headwinds like work from home and a slowing economy, but it's priced too cheaply in my opinion considering how much rental income it's generating.
The ASX share expects to generate funds from operations (FFO) – net rental profit of 11.1 cents per security in FY26 and pay a distribution per security of 10.1 cents. That means it's trading at just 8x its FY26's rental profit with a FY26 distribution yield of 11.5%.
The fund manager of Centuria Office REIT, Belinda Cheung, explained the positive long-term outlook for the ASX share after its FY26 third-quarter update:
Looking ahead, we maintain an optimistic outlook for the Australia metropolitan office markets across the medium term. Diminishing forecast supply has been further impacted by rising rates and inflation and is expected to amplify the significant disconnect between replacement costs and current valuations. The widening gap of economic rents to prevailing market rents not only prohibits feasible office development but provides ample room for current market rents to continue to grow and underpin future valuations, reinforcing the relative value of existing high-quality, well-located office assets.
