ASX dividend shares can deliver significant passive income on an annual basis if we choose the right ones.
Some investments offer similar or much higher dividend yields than what someone could get by putting savings in the bank.
Another benefit of ASX dividend shares is that they can deliver growth in both the share price and the payout over time. Term deposits offer fixed income with no potential capital growth, though they do provide guaranteed interest and no risk of capital loss.
With that in mind, let me tell you about two ASX dividend share investments I've chosen for my own portfolio to help deliver passive income.
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Future Generation Global Ltd (ASX: FGG)
I think Future Generation Global is a top listed investment company (LIC) for investors who want a boost in both their diversification and income.
It operates as a fund-of-funds by investing in more than 10 funds from different fund managers. But, pleasingly, there are no management fees or performance fees involved – they all work for free.
Why would they work pro bono? It's so that Future Generation Global can donate 1% of its net assets each year to youth mental health charities. It's a great initiative, in my view.
Using the investment returns generated, the ASX-listed company can pay steadily rising dividends. After the company pays the guided 8.4 cents per share annual dividend for FY26, it will have increased its payout for eight years in a row.
At the time of writing, that translates into a grossed-up dividend yield of 7.5%, including franking credits.
WCM Quality Global Growth Fund (ASX: WCMQ)
The other ASX dividend share I want to highlight is this exchange-traded fund (ETF).
There are plenty of high-quality ETFs with exposure to great international businesses on the ASX that Australians can choose, such as Vanguard MSCI Index International Shares ETF (ASX: VGS) and iShares S&P 500 AUD ETF (ASX: IVV). However, they offer very little passive income because the underlying businesses themselves don't have high dividend yields.
WCMQ ETF aims to deliver a strong dividend yield by targeting a distribution yield of at least 5%.
It aims to own a portfolio of between 20 to 40 stocks that are all quality global companies that have a growing economic moat as well as a corporate culture that fosters the improvement of the economic moat.
By focusing on businesses that are becoming increasingly good at what they do and becoming more profitable while doing it, WCMQ ETF can own a portfolio of great stocks that are likely to deliver good shareholder returns.
Since the WCMQ ETF's inception in August 2018, the fund has returned an average of 15.1% per year (after fees and expenses). The strategy that this fund follows has returned an average of 16.6% per year over the past decade.
Generate $400 per month of income
These two investments don't pay monthly, so I think it'd be better to think of the goal as an annual target and then divide that by 12. Targeting $400 per month means $4,800 per year.
Between the two investments above, they have an average dividend yield of 6.25%. If someone invested the same amount across the two names, they'd need $76,800 invested between them.
But, I'd also suggest having money across other investments to generate returns, rather than relying on just two names.
