The ASX dividend share MFF Capital Investments Ltd (ASX: MFF) is one of the leading choices for passive income, in my view.
It may not be as popular as names like BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA) or Woolworths Group Ltd (ASX: WOW). But, I think MFF is better than each of those ASX blue-chip shares for multiple reasons.
Let's get into what makes it such a good buy.
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Diversification
Each of the large ASX companies I mentioned above is an impressive business with significant operations.
However, an investment with MFF offers much more diversification because it owns a portfolio of shares, whereas the ASX blue-chips are singular businesses.
MFF aims to invest in competitively advantaged businesses, which are normally global blue-chip stocks.
Its largest holdings are names like Mastercard, Alphabet, Visa, Bank of America and Amazon.
The ASX dividend share's holdings have been long-term winners, and I believe there's a good chance they will continue to be long-term compounders.
Past performance is not a guarantee of future performance, but MFF's portfolio has delivered strong returns over the long-term.
According to CMC Invest, over the past five years MFF has delivered an average total shareholder return (TSR) of 16.2% per year.
I think its investment strategy can continue to perform well over the long-term and I expect its portfolio will continue to adjust over the years.
Dividend yield
One of the best reasons to like this ASX dividend share is down to its impressive dividend yield, which is superior to the ASX blue chip shares of CBA, BHP and Woolworths.
The business has provided guidance that it intends its next half-year dividend will be 12 cents per share and I expect the one after that will be 13 cents per share.
Assuming the business does pay an annual dividend per share of 25 cents per share in the 2027 financial year, it would represent a grossed-up dividend yield of 6.8%, including franking credits, at the time of writing.
Payout growth
Dividend growth is not a guarantee of course, but the business has a goal of increasing its dividend for investors each year and its large profit reserve and profit generation mean the business is able to pay consistently growing dividends.
In FY26 it grew its annual dividend per share by 23.5%, and I expect it will grow the dividend by another 19%. In my view, there are not many ASX dividend shares with yields above 6% that are likely to grow their payout at that pace.
MFF has grown its annual dividend per share each year since FY18, so it's building a pleasing track record of regular payout growth.
This ASX dividend share is one of the largest positions in my portfolio, and I'm expecting more pleasing payouts in the years to come.
