A big dividend yield can be hard to ignore.

When an ASX share is offering 7%, 8%, or even more, the potential income can look much more attractive than a company yielding 3% or 4%.

But if I were building a passive income portfolio for the long term, the starting yield would only be part of the decision.

I want the income to grow

A lower yield can become much more valuable if the dividend keeps increasing.

Imagine buying a company yielding 4% today. If its earnings continue growing and management steadily lifts the dividend, the cash received from that original investment could be considerably higher several years from now.

That is particularly important for investors who do not need the income immediately.

Inflation means a fixed dividend becomes less valuable over time. An income stream that can rise with earnings has a much better chance of maintaining its purchasing power.

Woolworths Group Ltd (ASX: WOW) is the type of business I would consider from that perspective.

Supermarket spending is relatively resilient, and Woolworths has opportunities to grow earnings through population growth, online retail, and continued improvements across its operations.

Its yield may not grab as much attention as some higher-yielding ASX shares, but I would be interested in what the dividend could look like years from now.

A huge yield can sometimes be a warning

Dividend yields rise when share prices fall.

That means an unusually high yield can sometimes appear because investors believe the company’s earnings or dividend are under pressure.

If a share offers a 9% yield and subsequently cuts its dividend in half, the original headline number becomes fairly meaningless.

This is why I would spend more time understanding the business than comparing dividend percentages.

Can earnings comfortably support the payment? Does the company need substantial capital to keep operating? Is debt manageable? Does management have room to increase the dividend if profits grow?

Those questions tell me much more about the quality of the income.

Infrastructure can provide another route

Transurban Group (ASX: TCL) is another business I think can make sense for long-term income investors.

Its toll-road network benefits as traffic grows over time, while toll increases can provide another source of revenue growth.

That creates the potential for distributions to increase as the underlying business expands.

Infrastructure also brings something different to a portfolio dominated by banks and traditional dividend shares.

I would still pay close attention to debt and valuation, particularly because infrastructure businesses can be sensitive to interest rates.

But the ability to generate growing cash flows over a long period is what would interest me most.

Income and growth can work together

I do not think passive income investing needs to mean sacrificing capital growth.

A strong business that reinvests part of its profits effectively can grow earnings, increase its dividend, and become more valuable at the same time.

That combination is what I would ideally want.

It may produce less cash in the first year than simply buying the highest-yielding shares available, but I think the long-term result can be far more attractive.

Foolish takeaway

If I were building an ASX passive income portfolio, I would not rank shares by dividend yield and start buying from the top.

I would look for businesses that can support their payments and have a reasonable chance of increasing them over time.

For me, a 4% yield that keeps growing could prove far more valuable than an 8% yield that eventually disappears.

The post Why I’d rather buy growing dividends than chase the highest ASX yields appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has positions in Transurban Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group. The Motley Fool Australia has positions in and has recommended Transurban Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

It has been a horrible year for WiseTech Global Ltd (ASX: WTC) shareholders.

The logistics software stock is down another 1.39% to $34.76 on Wednesday, taking its 12-month decline to around 63%.

WiseTech shares are also down almost 50% in 2026 and miles below their 52-week high of $99.53.

But at $34.76, I think the sell-off has gone way too far.

Yes, WiseTech still has plenty to prove, but the business is growing, generating cash, and remains a global logistics leader.

If management delivers on its FY27 targets, I think WiseTech shares could have plenty of room to recover from here.

Here’s why.

The business is still growing

You wouldn’t know it from the share price, but WiseTech is still putting up some very strong numbers.

FY26 revenue jumped 79% to US$1.4 billion following the e2open acquisition, while underlying net profit increased 29% to US$313.5 million.

What really catches my attention is the cash flow.

Underlying free cash flow climbed 67% to US$489.6 million, giving WiseTech plenty of firepower to invest in growth, reduce debt, and keep improving the business.

The e2open deal is also starting to show some early benefits.

Management delivered around US$115 million of annualised cost savings during FY26, including US$64 million from e2open.

To me, that’s a pretty encouraging start.

If WiseTech can keep pulling costs out while growing the combined business, I think earnings and cash flow could move much higher over the next few years.

Margins could be heading higher

WiseTech is expecting FY27 revenue of US$1.48 billion to US$1.54 billion, which would represent growth of 6% to 10%.

But I think the earnings outlook is where things get much more interesting.

Underlying EBITDA is forecast to rise between 12% and 21% to US$725 million to US$780 million, with margins expected to improve to between 49% and 51%.

There’s also plenty happening underneath those numbers.

WiseTech currently has 12 large global freight forwarder rollouts underway, while more than 95% of customers have moved onto CargoWise Value Packs.

SME signings have also increased around 55% since the new pricing model was introduced.

That gives me plenty of confidence heading into FY27.

Brokers see huge upside

I am not the only one who is bullish on WiseTech at these levels.

According to TipRanks, there are 9 buy ratings and just 1 hold among 10 ranked analysts, with an average price target of $58.12.

That’s around 67% above the current share price.

Morgans has a $62.50 target, Bell Potter is at $65, while Morgan Stanley is even more bullish with a $70 target.

If Morgan Stanley is right, WiseTech shares could more than double from here.

At $34.76, I think the market has already priced in plenty of bad news, while the upside could be significant if earnings keep growing.

The post Down 63%, I think WiseTech shares could be heading for a huge comeback appeared first on The Motley Fool Australia.

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

ASX shares have slumped this week as investors digest renewed conflict in the Middle East, oil prices and supply concerns, climbing inflation, and the potential for further interest rate hikes.

But here are five S&P/ASX 200 Index (ASX: XJO) shares that could turn the index around over the next 12 months. And they’re all rated a strong buy by brokers, with upsides of up to 62%.

Let’s take a look.

Life360 Inc (ASX: 360)

Life360 posted a strong second-quarter FY26 update in mid-August, including a 38% increase in revenue, and a 53% increase in adjusted EBITDA. And the company expects FY26 revenue growth to accelerate 33% to 40% year on year. But investors weren’t impressed, likely because they were expecting another upward revision to FY26 revenue guidance. But it looks like brokers now view the shares as below fair value. Market Index shows all brokers have a strong buy rating on the ASX shares and the $31.72 target price implies a potential 60% upside, at the time of writing.

Mesoblast Ltd (ASX: MSB)

The clinical-stage ASX biotech company has gained some attention since it posted its FY26 results last month. The company, which develops and commercialises allogeneic cellular medicines to treat complex diseases, posted a sharp increase in revenue to US$120.3 million for FY26, and a 44% reduction in net loss. And there’s plenty of potential for more growth ahead. Its products, particularly Ryoncil, are gaining traction and the business is well-funded. Brokers are also bullish that sales can continue growing strongly in FY27. Market Index data shows all brokers have a strong buy rating for the ASX shares. The $3.60 target price implies a potential 62% upside, at the time of writing. 

Megaport Ltd (ASX: MP1)

The ASX tech shares flew higher in late-May but slumped around 20% in August after the company posted its FY26 results. Megaport reported a 37% increase in full-year revenue, and EBITDA was up 24%. But, on the bottom line, its statutory net loss climbed to $39 million, up from $300,000 in FY25. Investors weren’t impressed and many quickly sold up their shares, sending the share price tumbling. But the company is continuing to grow and it has confirmed several new contracts since late-April. Brokers are bullish that we’ll see a share price correction ahead. Market Index data show that all brokers have a strong buy rating for Megaport shares. The $24.80 average target price implies a potential 39% upside, at the time of writing.

Nick Scali Ltd (ASX: NCK)

Shares of household furniture importer and retailer Nick Scali have plunged in 2026 as high interest rates and cost-of-living pressures continue to delay shoppers from buying big-ticket discretionary items like furniture. But the company’s latest FY26 results announcement shows the business is still operating well with a strong gross margin improvement. Last month, Nick Scali announced a 4% increase in revenue and a 22% increase in NPAT. Many experts still view Nick Scali as a high quality retailer with growth potential ahead. Market Index data shows the majority have a strong buy rating on the ASX shares. The $18.50 average target price implies around a 28% upside ahead, at the time of writing.

Judo Capital Holdings Ltd (ASX: JDO)

Judo was one of the strongest-performing bank shares on the ASX earlier this year. But the stock crashed 43% in late-June after it downgraded its profit guidance for FY26, and it has struggled to recover. Even a stronger-than-expected FY26 result wasn’t enough to reignite investor confidence. Judo’s NPAT increased 29% and profit before tax increased 34%, the top end of Judo’s revised guidance range. It’s clear that the sell-off was way overdone and that the bank’s latest results show it is growing stronger than many anticipated. Market Index data shows the majority of brokers have a strong buy rating on the shares. The $1.51 average target price implies a potential upside of around 50%, at the time of writing.

The post Brokers rate these 5 ASX shares as a strong buy, and tip upsides of 28% to 62% appeared first on The Motley Fool Australia.

More reading

• 7 ASX healthcare stock picks from Bell Potter
• 2 top ASX 200 shares tipped to return 23% to 45%
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• Xero and Megaport: 2 ASX tech shares the market can’t agree on
• 3 ASX healthcare shares to buy with 25% to 100% upside as sector rebound races higher

Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360 and Megaport. The Motley Fool Australia has positions in and has recommended Life360. The Motley Fool Australia has recommended Nick Scali. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.