I'm backing ASX dividend stock WCM Global Growth Ltd (ASX: WQG) as one of the best picks for passive income on the ASX.
In my own portfolio, I'm building positions in businesses that pay strong dividends and have a track record of returns. I'm utilising dividend income to pay for certain discretionary expenses in life, and that's helping boost my household's finances.
Thankfully, WCM Global Growth is also delivering dividend growth and long-term capital growth, which means it's giving me a trifecta of what I'm looking for financially – dividend yield, payout growth, and capital growth.
Let's run through why the listed investment company (LIC) is a strong pick with a $3,000 investment for passive income.
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Compelling investment strategy
WCM Global Growth is a California-based investment manager that specialises in global and emerging market shares. WCM specialises in global shares and emerging market shares.
The fund manager looks for two key criteria to be considered for inclusion in the WCM Global Growth portfolio.
First, it wants to see a rising competitive advantage (or expanding economic moat).
Second, WCM wants to see that the company has a corporate culture that supports the expansion of this moat.
The WCM investment team believe that the 'direction' of a company's economic moat is of more importance than its absolute size. The research focuses on identifying companies with a positive moat trajectory, as measured by rising return on invested capital, rather than those with a large but static or declining economic moat.
Since its inception in June 2017, the LIC has delivered net returns of 15.6% per year, after fees, and is more than 2% per year stronger than the global share market benchmark return.
Those good returns allow the business to pay a rewarding dividend.
Large dividend yield
The ASX dividend stock has provided guidance that it will pay an annual dividend per share of 10.1 cents over the next 12 months.
At the time of writing, that means it's going to deliver a dividend yield of 4.9% excluding franking credits and 7% including franking credits.
In my view, there are few businesses that are going to pay a dividend yield as good as that over the next 12 months and deliver growth.
Passive income growth
The LIC has a "progressive quarterly dividend policy". In other words, it delivers a payout every quarter, and that dividend is growing every three months.
Its latest quarterly dividend payment was 2.35 cents per share, paid on 30 September 2026. The LIC has shown how the dividend will progress over the next 12 months.
It plans to pay a quarterly dividend of 2.45 cents per share in December 2026 – that's 4.25% higher than the September payment.
WCM Global Growth expects to pay a quarterly dividend of 2.5 cents per share in March 2027 – that's 6.4% more than the September payment.
The LIC has guided that it will pay 2.55 cents per share in June 2027 – that's an 8.5% increase compared to the September payout.
The ASX dividend stock plans to pay a quarterly dividend of 2.6 cents per share in September 2027 – that's a year-over-year increase of 10.6%.
Its dividend has regularly grown over the last several years. I expect the business will be able to continue hiking its dividend at an inflation-beating rate in the coming years.
Capital growth
When LICs generate investment profits, they can decide to pay some of it as a dividend and smooth out the passive income returns for shareholders.
How much of the profit they pay will decide how much is retained to generate more returns. Retained profits help deliver capital growth as the LIC's net tangible assets (NTA) grow.
The bigger the dividend yield LICs deliver, the less that's retained for future growth. So, LICs need to strike the right balance between short-term dividends and retaining some profits for long-term performance.
Thankfully, WCM Global Growth's investment returns have been sufficient to deliver a good dividend and add to its NTA over time. Over the past three years, the WCM Global Growth share price has risen by around 70%. Past performance is not a reliable indicator of future performance, of course.
$3,000 investment
By investing $3,000 at the time of writing, an investor can buy 1,463 shares of this ASX dividend stock, which I think would be a smart choice for passive income investors.
But, it's not the only business I'd be willing to put $3,000 (or more) into to generate returns.
