Why this ASX dividend share is a retiree’s dream!

ASX dividend shares can provide retirees with a pleasing level of passive income that can’t be found elsewhere, often outperforming both commercial property and term deposits.

Share prices can be volatile during certain periods, but dividends can be much more consistent because it’s the board of directors who decide the level of the payout, assuming the company has the profit reserve to do so.

The great thing about companies is that they can pay a dividend and grow their profit over time, leading to larger dividends and hopefully share price growth.

The ASX dividend share I want to highlight that could appeal to retirees is Future Generation Global Ltd (ASX: FGG). It’s a listed investment company (LIC) with a number of pleasing attributes. LICs generate profit by making returns from an investment portfolio.

Big dividend yield and diversification

The business has been very consistent with its dividend growth for investors. It paid an annual dividend per share of 1 cent in FY18 and has increased its payout every year since.

In the recently-announced FY25 result, it grew its regular annual payout by 8% to 8 cents per share. Its regular dividend translates into a grossed-up dividend yield of 7.1%, including franking credits. Additionally, it declared a special dividend per share of 3 cents with the FY25 result, boosting the passive income for investors.

That means the FY25 payout comes to a total grossed-up dividend yield of 9.8%. I’m expecting the regular dividend to rise again in FY26.

This LIC has generated investment returns through its portfolio, which is invested in a number of funds managed by different fund managers. The fact that it’s invested in 16 different funds gives it enormous diversification with exposure to more than 3,500 underlying shares across different sectors and markets.

Over the past seven years, the Future Generation Global portfolio has returned an average of 10.4% per year, which is enough for the ASX dividend share to pay a good dividend and still deliver growth in the value of the portfolio over time.

Admirable setup

A typical LIC charges management fees to investors, which is understandable, but it does mean investors are losing some of the returns to investment professionals.

Future Generation Global does not charge management fees (or performance fees). Instead, the LIC donates 1% of its net assets to youth mental health charities. That’s a very worthwhile cause and means millions of dollars can be donated each year.

Not only is it delivering good passive income for retirees, but you can feel great about it too.

Appealing discount

Exchange-traded funds (ETFs) should trade at the underlying values of their portfolio, while LICs can sometimes trade at a discount or premium to their underlying value (usually measured by the net tangible assets (NTA)). At the end of January 2026, it had NTA of $1.693 per share.

At the time of writing, it’s trading at a 5.5% discount. I think it’s appealing to buy a business when it’s clearly trading at a discount to its underlying value.

The post Why this ASX dividend share is a retiree’s dream! appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Future Generation Global. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.