The ASX dividend stock area of the Aussie share market is the best place to find ideas for passive income, in my view.
WAM Leaders Ltd (ASX: WLE) is one idea that could be particularly attractive for dividends in the short-term and the long-term. It may not be as famous as names like BHP Group Ltd (ASX: BHP) or Westpac Banking Corp (ASX: WBC), but I think it could be a more effective option.
Let's dive into the appeal of the listed investment company (LIC).
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Large and rising dividend
One of the best things about the LIC structure is that it can use profits from prior-year investment returns to pay a consistently growing dividend, even when the share market is volatile.
WAM Leaders has grown its annual dividend per share each year since FY17. Not many ASX shares can claim that sort of growth consistency.
The ASX dividend stock expects to pay an annual dividend per share of 9.6 cents in FY26, so the business now has a grossed-up dividend yield of 9.9%, including franking credits, which is an extremely high yield, of course.
WAM Leaders manages to deliver this income return thanks to its investment performance – its portfolio returned an average of 12% per year since inception in May 2016, before fees, expenses and taxes. That's almost 3% per year better than the S&P/ASX 200 Accumulation Index (ASX: XJOA) over the same time period.
I believe the business is capable of continuing that dividend record because of its strategy to be active with its portfolio focused on larger ASX shares.
Currently, some of its larger investments include Ampol Ltd (ASX: ALD), Aristocrat Leisure Ltd (ASX: ALL), Amcor (ASX: AMC), Charter Hall Group (ASX: CHC), Goodman Group (ASX: GMG), GPT Group (ASX: GPT), James Hardie Industries plc (ASX: JHX), Mirvac Group (ASX: MGR), Nexgen Energy (Canada) CDI (ASX: NXG), Qantas Airways Ltd (ASX: QAN), Scentre Group (ASX: SCG) and Stockland Corporation Ltd (ASX: SGP).
As you can see, the portfolio is diversified across various names. That's more appealing to me than owning a singular large stock.
I'm sure the portfolio will change over time as different opportunities become more or less attractive.
Even if the ASX dividend stock doesn't generate any positive investment returns in the near-term, the dividend looks quite secure because it has a profit reserve of 26.9 cents – that's close to three years of dividend funding at the current level.
How many shares of the ASX dividend stock would $1,000 buy?
I think this is a fine time to buy a slice of the ASX dividend stock because it's trading close to its net tangible assets (NTA) – its underlying value.
If someone were to invest $1,000 today, they'd be able to buy 720 WAM Leaders shares. With that, they'd likely be able to unlock $98.74 of grossed-up dividend income (including franking credits), with $69.12 of that being the cash dividend and the rest being franking credits.
Overall, I think the business has a number of positives and is one of the attractive ASX dividend stocks to consider, along with other options.
