Why I made this top ASX dividend share one of my biggest investments

ASX dividend shares are some of my favourite investments in my portfolio because they provide a mix of passive income and long-term growth.

I own a mixture of ASX dividend shares, ASX growth shares and exchange-traded funds (ETFs) for a variety of investment purposes.

One of the businesses that I’ve made among my biggest positions is L1 Long Short Fund Ltd (ASX: LSF).

For me, there are three key reasons that I really like the listed investment company (LIC).

Good and growing passive income

The LIC has an impressive track record of delivering consistent dividend growth.

It has increased its annual payout each year since it started paying in FY21. The business recently changed to paying a quarterly dividend and it has been increasing its dividend every quarter.

If it continues growing its quarterly dividend at a similar pace, the next four dividends would come to a grossed-up dividend yield of 4.9%, including franking credits, at the time of writing.

I think that’s a solid starting point, with plenty of room for further dividend growth as a result of strong investment performance. I expect the November 2026 quarterly dividend to be 11.4% larger than the November 2025 quarterly dividend.

Strong investment performance

A LIC funds its dividends from the investment performance of its portfolio. With the ASX dividend share’s excellent long-term performance, it can continue paying pleasing passive income and funding growing payouts.

The performance has been so good that it has been able to deliver excellent capital growth too. In the past eight years, the L1 Long Short Fund share price has risen close to 130%.

The LIC targets a mixture of both ASX shares and international shares, through both normal investing and short-selling. Through that strategy, it’s able to utilise both good value and expensive shares, locally and globally, to its advantage.

In the past five years, the L1 Long Short Fund portfolio has returned an average of 17% (net) per year. That’s a great return, in my opinion! Of course, past performance is not a guarantee of future performance.

Diversification

One of the best reasons I like this business is how it generates returns. It hasn’t relied on technology businesses due to how it invests – it’s more likely to short a tech stock than invest in it for the long-term.

Instead, it looks at opportunities in other areas such as gold shares, copper shares, industrials and telecommunications. In other words, the ‘real’ economy.

You can make good returns in almost any business, including cyclical ones, if bought at the right price. So, by investing in this ASX dividend share, I’m getting exposure to companies and sectors I don’t in other parts of my portfolio.  

But, this isn’t the only ASX dividend share I want to buy for my portfolio.

The post Why I made this top ASX dividend share one of my biggest investments appeared first on The Motley Fool Australia.

More reading

• Where should I invest inside SMSFs instead of property?
• How to invest $12,500 for passive income in superannuation?
• How much is needed in superannuation to target a $9,000 monthly passive income?
• 2 great ASX dividend shares I plan to buy in June
• Forget BHP shares! Buy these ASX dividend shares instead for passive income

Motley Fool contributor Tristan Harrison has positions in L1 Long Short Fund. 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.