An ASX dividend stalwart every Australian should consider buying

There are a few ASX dividend stalwarts that I’d suggest putting in a passive income-focused portfolio. One of those is the business L1 Long Short Fund Ltd (ASX: LSF).

L1 Long Short Fund Ltd is a listed investment company (LIC) that is managed by the fund manager L1 Group Ltd (ASX: L1G). LICs generate accounting profits for their financials by making investment returns from a portfolio of shares.

L1 Long Short Fund invests in both ASX shares and international shares, while utilising both long-term investing and short-selling strategies. Short-selling means betting that a share price will go down.

Using that strategy, the ASX dividend stalwart is able to generate returns regardless of whether the market is going up or down.

Excellent investment returns

Past returns are not a guarantee of future returns, of course. But, at the same time, an investment manager with a history of strong outperformance is worth paying attention to.

I’d describe L1 Long Short Fund as being a contrarian investor with a willingness to invest in businesses with a lower price/earnings (P/E) ratios accompanied by confidence of solid earnings growth.

As of January 2026, the sectors that had delivered the most returns using this investment strategy were (in order of biggest returns): ASX mining shares, then industrials, communication services, utilities and financials. Considering the recent performance of many tech names, it’s probably a good thing the LIC has largely avoided long-term investing in the technology sector.

Giving its latest view on the ASX share market and global stock market, L1 wrote in the January 2026 update:

We believe the Australian equity index is relatively fully valued, with several large cap stocks, particularly within the ASX20, trading well above historical multiples and global peers. Encouragingly, we are continuing to find numerous undervalued stocks, where we see a far more compelling combination of strong earnings growth, shareholder-friendly management, conservative balance sheets and significant valuation support.

We continue to believe that infrastructure, gold, U.S. cyclicals, uranium and ‘quality value’ stocks provide some of the best opportunities globally. Given the enormous outperformance of high P/E stocks in recent years and over the past decade, we are finding more compelling opportunities in ‘Value’ stocks. We believe low P/E stocks will strongly outperform high P/E stocks (in general) over the coming 1-2 years, which the portfolio is well positioned to benefit from.

I like getting exposure to a range of investments to generate my investment returns, and I like that this ASX dividend stalwart looks at a variety of sectors that may not necessarily be my own preferred hunting ground.

Since inception in April 2018 to January 2026, the LIC’s portfolio delivered an average return per year of 15.1%. Over the seven years to January 2026, it returned an average of 21.5%. I’m not expecting the returns to be that strong in the years ahead, but it shows how well the LIC has been able to perform.

These returns have funded pleasing dividends.

ASX dividend stalwart credentials

It has increased its half-year dividend per share each year since FY21 and it’s aiming to increase its dividend each year for investors. It has already built up a large accounting profit reserve that can fund rising dividends for years to come.

The business recently switched to paying quarterly dividends to investors, providing more frequent cash flow for bank accounts.

Its combined FY26 first quarter and second quarter dividend (totalling 7.1 cents per share) is 13.6% higher than the FY25 first-half dividend. If the business continues increasing its FY26 quarterly dividend by 0.1 cents per share in the next two quarters, its FY26 annual payout will be 14.6 cents per share, translating into a grossed-up dividend yield of 4.7%, including franking credits.

That’s not a huge starting dividend yield, but I think the payout will progressively grow from here, making it a very appealing ASX dividend stalwart for the long-term.

The post An ASX dividend stalwart every Australian should consider buying appeared first on The Motley Fool Australia.

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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.