The ASX dividend stock Hearts and Minds Investments Ltd (ASX: HM1) may not be one of the most famous passive income shares, but it offers numerous benefits.
The dividend yields of BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA) are only around mid-single digits right now. Plus, both of those ASX blue-chip share heavyweights have reduced their payout to shareholders this decade.
Hearts and Minds Investments is a much better choice right now, in my view, than many other ASX dividend stocks.
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Diversification
Firstly, let's talk about how Hearts and Minds operates.
It's a listed investment company (LIC), which means it uses shareholder money to invest in different shares (or assets).
Hearts and Minds is different from most other LICs because its portfolio is not decided by a single fund manager. Instead, a number of investment professionals are involved, all working so that the LIC can donate an equivalent amount to medical research – it's a great setup.
The portfolio has a very significant slant to international shares, though in previous years some of its largest holdings have been ASX shares.
A majority of the portfolio is decided by a group of portfolio fund managers who bring their best picks into the picture. The rest of the portfolio is decided at an annual investment conference where investment professionals each pitch their best idea.
So, it's a best-pick portfolio that can give investors broad exposure to international stocks, which I think most Australians could benefit from.
Volatility has hampered performance in recent times, but it has still delivered respectable returns over the last few years. Over the three years to July 2026, the ASX dividend stock's portfolio has returned an average of 12% per year after expenses (but before taxes).
Reliable payouts
Given those investment returns, the LIC can pay investors a steadily growing dividend.
It started paying a dividend in 2021 and hasn't reduced its payout in that time. Hearts and Minds started paying dividends every six months in 2023 and has increased its half-year payout each year since 2024.
The board of directors of the business have provided guidance that the LIC will increase its half-year dividend by 0.5 cents every six months for the foreseeable future.
Big dividend yield
Another reason to like this ASX dividend stock is its high dividend yield. Therefore, the business is providing a large and growing payout.
Assuming it does continue increasing its payout by 0.5 cents every six months, the business should pay 20.5 cents per share over the next 12 months.
At the time of writing, that translates into a grossed-up dividend yield of 9.6%, including franking credits.
The ASX dividend stock trades at a significant discount
One of the main reasons why the dividend yield is so large so because it's trading at a significant discount to its underlying assets.
The business reported that its pre-tax net tangible assets (NTA) was $3.65 at 7 August 2026. That means the Hearts and Minds Investments share price is trading at a 16% discount (at the time of writing) to that pre-tax NTA.
Buying good ASX dividend stocks at a significant discount also means that we're more likely to see capital growth.
A $1,000 investment buys…
If someone were to invest $1,000 in this ASX dividend stock, they could buy 326 shares of it. I think that'd be a solid choice today, among other leading ideas for passive income.
