ASX dividend shares can be some of the best investments for passive income because of the combination of yield and growth.
Savings accounts don’t offer payout growth (beyond RBA rate changes) and the income return isn’t as appealing as what some ASX dividend shares offer.
I’ll talk about two ASX dividend shares I’m a big fan of. I’ve held them for several years because of my belief in their long-term appeal.
Future Generation Global Ltd (ASX: FGG)
This business is a listed investment company (LIC) with a couple of key differences. Typical LICs are managed by an external fund management outfit that charges a fee (such as 1% of net assets).
The first difference with this LIC is that the business is invested in a number of funds from different fund managers – there is significant diversification achieved by that strategy and gives investors exposure to a range of shares (there are more than 3,500 underlying shares). These funds target global shares, so this ASX dividend share gets exposure to businesses you won’t find on the ASX.
The second key difference is that there are no management fees or performance fees involved because the fund managers work pro bono (for free) for a good cause – Future Generation Global donates 1% of its net assets to charities focused on youth mental health.
The portfolio has performed soundly, with an average annual return of 18.1% over the prior three years and 11.1% over the prior seven years.
Its FY25 full-year payout translates into a dividend yield of 7.4% when you include the bonus of the franking credits. That’s a great starting yield, in my book.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
WHSP is one of my favourite ASX dividend shares because of the stability and dividend growth it provides.
The ASX 200 (ASX: XJO) share is an investment conglomerate that invests in a mixture of ASX shares, international shares, private businesses (private equity), credit (loans/bonds) and property.
By having that diversified portfolio, the company has lowered risks for shareholders while also opening up a wide range of opportunities. It can invest in virtually anything across the Australian economy if it thinks it’s an opportunity.
WHSP’s consecutive annual dividend growth streak stretches back to 1998, so there is a high likelihood of a dividend increase each year.
With a current dividend yield of 3.9% (if we include the franking credits), it’s not a big starting point, but steady progression can help it become a much larger dividend yield over time. I think this investment is one of the most appealing ASX dividend shares around.
