The ASX shares that I've got in my portfolio all have something in common: they all pay passive income. I like receiving dividends, though that's not the only thing I look for.
It's understandable why plenty of investors are attracted to names like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and Woodside Energy Group Ltd (ASX: WDS) – blue chips paying large, fully franked dividends.
But, I'm not looking for maximum passive income. I want to find investments that can deliver strong total returns, but they need to deliver some sort of annual passive income payment.
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Why I love passive dividend income so much
I'm invested in a number of dividend-paying ASX shares such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Brickworks Limited (ASX: BKW), Duxton Water Ltd (ASX: D2O), Fortescue Metals Group Ltd (ASX: FMG), Altium Limited (ASX: ALU) and Rural Funds Group (ASX: RFF).
Thankfully I'm sitting on capital gains on each of those investments.
I like that all of these businesses pay dividends from their profit because it means I don't need to sell any of my shares to access some of the returns or profit.
I know myself – trying to think about when to sell would likely stress me out. I'd also probably feel regret if the sold shares went higher after I'd sold them. I want to feel relaxed and rewarded regarding my ASX share portfolio, not stressed and regretful.
I'd also hate needing to sell during a market decline at a discount price – I'd rather be buying than selling during a time like that. Receiving the cash flow of dividends means that each of my investments is sending me 'real' returns each year. I don't need to sell, pay brokerage fees or trigger any capital gains tax events.
I think that focusing on the dividend income means I can focus on the long-term and the profit, rather than worrying about what the share price is doing in the short-term (particularly when there are declines).
For the Australian companies that attach franking credits to their dividend payments, I like that the passive dividend income is boosted when it comes to the after-tax yield.
Finally, I like that dividend payments can provide fairly consistent returns every three/six/twelve months.
If I choose the right dividend-paying ASX shares and buy at a good price, I can benefit from both dividends and capital growth over the long term.
Foolish takeaway
For my own (and my family's) personality and mindset, I think I've settled on what works best. However, I also love looking at ASX growth share opportunities as part of my work – that's what's so great about the ASX share market, we can find opportunities in all parts of the market.
