I like the idea of owning ASX dividend shares that pay attractive income to investors.
Lots of people may think of shares as a way to achieve share price growth, but dividends can be a very effective way to receive investment returns as well, perhaps with less volatility.
For investors focused on income, these two listed investment companies (LICs) are good options.
Hearts and Minds Investments Ltd (ASX: HM1)
Hearts and Minds is a diversified LIC because it’s invested in a number of ASX shares and international shares.
It’s based on taking the stock picking of a number of different fund managers and combining the best picks into a portfolio.
There is a core group of fund managers that have provided stocks for the portfolio. Every year, there is an investment conference that fund managers can present, and those picks are owned for 12 months.
All of the fund managers provide those picks for free, so that Hearts and Minds can donate money to medical research and mental health charities.
After suffering from the tech sell-off during 2022, it made some investment changes so that the portfolio would be more diversified.
The last dividend paid by the ASX dividend share was 13.5 cents per share, which is a dividend yield of 8.6% including the franking credits.
WAM Microcap Limited (ASX: WMI)
This LIC is focused on the small end of the ASX share market. I think small businesses have more growth potential than large ones due to their small size and that not many investors hunt in the microcap end.
The investment fund has done very well, with an annualised gross return of 14.7%, though that’s before management fees.
WAM Microcap has been using its solid performance to pay steadily growing fully franked dividends. In FY23 it’s guiding that it will pay an annual dividend of $0.105 per share, which is a dividend yield of 10.9%.
While most of the return will be coming in the form of dividends, I reckon that over the next three years it can deliver inflation-beating share price growth as well.