The ASX share market is a great place to find ideas that can deliver capital growth. I also like ASX dividend shares because they can generate passive income.
Cash savings are safe in a term deposit, but the income is fixed – there's no organic payout growth potential. Quality ASX dividend shares can provide an appealing dividend yield each year and hike their payouts regularly.
I'm going to outline two exciting contenders that could provide significant dividend income.
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WCM Global Growth Ltd (ASX: WQG)
This first option I want to highlight is a listed investment company (LIC). The job of a LIC is to invest in shares (or other assets) and generate investment returns for shareholders. The LIC can then turn some of those investment profits into dividend income.
I like the LIC structure because it can give investors both diversification (thanks to the investment portfolio) and a good dividend.
WCM Global Growth targets a global portfolio of high-quality stocks. It wants to find businesses with expanding economic moats (improving competitive advantages). One of the ways it measures the expansion of the economic moat is whether the return on invested capital (ROIC) is rising.
WCM also wants to see that the target business has a corporate culture that fosters an improvement of the economic moat. The investment team in charge of the LIC have a proprietary way to judge the corporate culture.
The investment strategy is clearly working for the ASX dividend share because in October it announced in its monthly ASX update that its net return performance between inception (21 June 2017) and 30 September 2026 was 15.7% per year, outperforming the MSCI All Country World Index (ex-Australia) benchmark by an average of just over 2% per year.
It's using some of the investment performance to pay pleasing dividends. It started paying a dividend in 2019 and has grown its annual dividend every year since. The LIC expects to pay dividends totalling 10.1 cents per share over the next 12 months, which is a grossed-up dividend yield of 7.5%, including franking credits, at the time of writing.
It looks like a good time to buy because it's trading at a slight (0.5%) discount to the net tangible assets (NTA) as at 23 October 2026, whereas it's been trading at a premium to the NTA in recent months.
Medibank Private Ltd (ASX: MPL)
Medibank is the largest private health insurer in Australia with its Medibank and ahm brands.
I think the business operates in a pleasingly defensive sector of healthcare. The older we get, the more likely we'll need healthcare, and this means Australia's ageing demographic is a useful tailwind for demand for Medibank's services.
Its policyholder base is steadily growing, giving it financial fuel to grow its bottom line and the dividend. During FY26, it added 22,100 net resident policyholders. This helped the company grow its group operating profit by 6.7% to $813.5 million and hike the dividend by 6.7% to 19.2 cents per share. It has grown its annual dividend each year since FY21.
In FY27, it aims to grow its market share of resident policyholders. It also expects the Medibank Health segment profit to rise by around 25% thanks to a full-year contribution from Better Medical.
According to the projection on Commsec, the business is forecast to pay an annual dividend of 21.5 cents per share in FY27. That translates into a grossed-up dividend yield of 6.1%, including franking credits, at the time of writing.
$500 per month of dividends
Unlocking $500 per month of dividend income translates into an annual target of $6,000.
Between the two ASX dividend shares I've mentioned, the average dividend yield is 6.8% (including franking credits). It'd take an investment of $88,235, equally split between them, to reach the desired income goal (including franking credits). I'd be very happy to make that investment today (while owning other ASX dividend shares too for diversification).
