There's a select group of high-yield ASX dividend stocks that I'd prefer to own over receiving the Age Pension. One of them is the listed investment company (LIC) L1 Long Short Fund Ltd (ASX: LSF).
LICs invest on behalf of shareholders, owning different shares or assets to generate returns. The L1 Long Short Fund looks at both ASX shares and global shares for potential opportunities, using "rigorous" and independent research.
It's not a typical fund manager, though. It looks to invest with a contrarian mindset, which I think can unlock significant returns if the investment team invest in the right areas at the right valuations, particularly cyclical industries.
I'll talk more about its benefits in a moment.
Right now, a single Australian can receive a maximum annual pension of around $31,200. I'd say that's one of the things that makes us a lucky country. Even so, I'd rather receive $31,200 of passive income from a quality high-yield ASX dividend stock like L1 Long Short Fund.
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Very successful investment strategy
Any company needs to make profits to fund dividend payments. For a LIC, they fund payouts from investment returns.
It has done very well over the long-term, though past performance is not a guarantee of future returns, of course. As of June 2026, the strategy had returned a net average of 16.9% over the prior five years, 20.4% per year over the past seven years and 20.2% per year since September 2014.
Those returns have been generated by three main sectors – materials, industrials and communication services, though financials and utilities have also played their part.
The portfolio has essentially been able to match the ASX share market return during positive months but fall significantly less when the ASX declines. Part of the LIC's strategy involves short selling, which means it can make money on certain stocks by betting they'll fall.
With those great returns, the LIC is delivering a solid and rapidly growing dividend.
Pleasing dividends
L1 Long Short Fund started paying a dividend in February 2021 and has increased its dividend every period since then.
In FY26, the LIC started paying dividends on a quarterly basis, increasing the frequency of cash flow for shareholders.
I expect its FY26 annual dividend will be 14.6 cents per share, which would be 14.5% higher than the FY25 annual dividend. The board of directors expect total dividends to continue increasing. I think the FY27 annual payout is likely to grow by at least another 10%.
I expect the next 12 months of dividends to come to a grossed-up dividend yield of 4.8%, including franking credits, at the time of writing.
However, it's not paying out all of its investment returns as dividends, it's retaining a significant majority, which can help drive capital growth.
Capital growth potential
We've established it's an exciting option for passive income, but it can also deliver capital growth.
Over the past five years, the L1 Long Short Fund share price has risen 78%.
I'm not necessarily expecting the next five years to be as good as that, considering it's also paying a sizeable dividend, but I think it's a compelling combination of returns.
How many shares to match the Age Pension?
Time will tell what the FY27 payout is, but I'm assuming it could be at least 16.2 cents.
If that happens, an investor would need to own 192,593 shares to make $31,200 of income if we don't include the franking credits and 134,814 shares if we do include the franking credits as part of the income.
I think this is a very compelling high-yield ASX dividend stock and I've already made it one of the largest positions in my portfolio, though I've ensured there are other picks in my holdings, too.
