The ASX dividend stock space is one of the best things about the ASX share market. How good is it to receive regular passive income and an attractive dividend yield?
There are plenty of appealing, dividend-paying businesses on the ASX like Medibank Private Ltd (ASX: MPL), Centuria Industrial REIT (ASX: CIP) and Telstra Group Ltd (ASX: TLS). All of them would be worthy of a spot in a dividend-paying portfolio, in my view.
But, for my own portfolio, there are a few ASX dividend stocks that I've backed heavily and I think it's good to be open about which ASX shares I'm buying, partly because of the dividends being provided.
With that in mind, I'm going to highlight L1 Long Short Fund Ltd (ASX: LSF), my second-largest holding.
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Very effective investment strategy
The business invests in ASX shares and, to a lesser degree, global shares.
It invests using a bottom-up, fundamental, research-driven investment approach focused on strict quality and valuation criteria, resulting in an investment style that is value and contrarian biased.
The fund uses both and long and short positions aiming to profit from both rising and falling share prices.
L1 Long Short Fund said in its July 2026 update that it's focusing on company-specific opportunities where valuation and earnings delivery can drive returns across a range of market environments.
The fund manager believes the portfolio looked well placed, with the medium long position trading on a price/earnings (P/E) ratio of 10, supported by double-digit earnings per share (EPS) growth and modest debt levels.
The listed investment company (LIC) invests quite differently for the S&P/ASX 200 Index (ASX: XJO), giving investors useful exposure to compelling businesses.
Diversification
The ASX share market is largely focused on ASX bank shares and ASX mining shares.
This ASX dividend stock invests in a "highly diversified portfolio of typically 50 – 100 long and short positions".
L1 Long Short Fund has generated returns for a number of sectors, but the main three have been materials, industrials and communication services, with the next two most profitable sectors being utilities and financials.
As I've already mentioned, the LIC is invested across ANZ, North America, Europe and Asia, which is pleasing geographic diversification.
Strong dividend income
As a LIC, the ASX dividend stock can turn investment returns into passive income.
Over the last five years, L1 Long Short Fund's portfolio has returned an average of 17.1%, which is a strong level of return.
L1 Long Short Fund has grown its annual dividend per share each year since 2021, which is a pleasing and growing dividend streak.
The LIC recently switched to quarterly payments and now increases its dividend every three months.
It hiked its FY26 annual payout by 14.5% to 14.6 cents per share. That translates into a grossed-up dividend yield of 4.3%, including franking credits.
I think the FY27 payout will be at least 16.2 cents per share, representing year-over-year growth of at least 11%. I think the grossed-up dividend yield will be at least 4.8%, including franking credits.
Compelling ASX dividend stock investment
With $3,000, investors could buy 625 shares of the L1 Long Short Fund, unlocking plenty of passive income for shareholders.
I think it pays to take a contrarian view on shares, and this LIC has proven very effective.
In my view, its strategy gives it a great chance to outperform the ASX 200 over the next five years.
