A 5.25% dividend yield today! But here's why I'm buying this ASX stock for the long term

I like this stock for quite a few different reasons.

| More on:
A young office worker is surrounded by peers who are clapping and congratulating her.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

I've been focusing my investment dollars on the ASX stock MFF Capital Investments Ltd (ASX: MFF) in the last couple of months.

MFF built its reputation as a listed investment company (LIC), but it recently announced the acquisition of a fund manager called Montaka to add an operational element to the business.

The business is led by Magellan Financial Group Ltd (ASX: MFG) co-founder Chris Mackay, but the addition of the Montaka investment team will broaden MFF's research team, expand its research capabilities and potentially unlock additional investment opportunities.

Montaka will continue to operate as a funds management business, and MFF Capital expects to add to Montaka's administration teams to help free up some of the investment professionals' time. I think this is a good move and could unlock significant value for MFF shareholders over time.

But, while appealing, Montaka is not why I invested in MFF shares.

I'd also called MFF an ASX dividend share because it is expecting to pay an annualised grossed-up dividend yield of 5.25%, including franking credits, in FY25. Plus, it has grown its annual dividend every year since 2018.

However, while I like receiving passive income, the dividend is not the main reason why I invested in this ASX stock either.

Exposure to major US stocks with investment flexibility

It's understandable that a lot of Aussies have a bias towards investing in the ASX share market.

However, the ASX only accounts for around 2% of the global share market and many of the world's best businesses can be found on stock markets in the northern hemisphere.

I believe that Aussies, including myself, would benefit from having a portion of their portfolio allocated to names like Microsoft, Alphabet (Google), Amazon, Meta Platformsand others like them. These are among the world's best and strongest businesses with incredibly strong balance sheets.

We can get direct or indirect exposure to the US-listed global giants through our brokers. We don't necessarily need to buy shares of those businesses ourselves, instead we can get exposure through exchange-traded funds (ETFs) or listed investment companies (LICs).

I believe a number of ASX ETFs out there are some of the best investments that Aussies can buy.

However, one drawback is that index-based ASX ETFs don't have the flexibility to change their investments if a holding company is weakening because the ETF portfolios must match the index. LIC investment teams can respond to conditions by changing the portfolio and selling or buying.

As a globally-focused LIC, I like that MFF can choose to invest anywhere it wants to.

Currently, almost 60% of the MFF portfolio is spread across Amazon, MasterCard, Visa, Meta Platforms, Alphabet and Microsoft.

I like that the ASX stock provides a lot of exposure to those great businesses, but I also appreciate that MFF can sell and move on, if it makes sense too. For me, the ASX stock's grossed-up dividend yield of more than 5% is a bonus.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Motley Fool contributor Tristan Harrison has positions in Mff Capital Investments. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Mastercard, Meta Platforms, Microsoft, and Visa. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2025 $370 calls on Mastercard, long January 2026 $395 calls on Microsoft, short January 2025 $380 calls on Mastercard, and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Mastercard, Meta Platforms, Mff Capital Investments, Microsoft, and Visa. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Opinions

I young woman takes a bite out of a burrito n the street outside a Mexican fast-food establishment.
Opinions

As the Guzman y Gomez share price drops 14% on results, what should investors do?

Is the Mexican restaurant stock’s valuation still too spicy?

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Opinions

Near 52-week lows, are these ASX 300 shares now unmissable bargains?

Are these stocks at valuations that are too good to ignore?

Read more »

A businessman hugs his computer and smiles.
Opinions

If I could only buy and hold a single ASX stock right now, this would be it

This business has a lot of positives.

Read more »

Young couple at the counter of a hardware store.
Opinions

Is the Wesfarmers share price a buy after the company's half-year result?

Is this retail giant still a buy after its big rise?

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Opinions

Where I'd invest in ASX shares now the RBA is starting to cut interest rates

These ASX shares look like appealing opportunities amid the RBA rate reduction.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Growth Shares

I think these ASX growth shares could be top buys right now

I am backing these stocks to deliver significant growth.

Read more »

A worried woman looks at her phone and laptop, seeking ways to tighten her belt against inflation.
Bank Shares

I'm getting nervous about the CBA share price

The higher CBA climbs, the more nervous I get.

Read more »

Smiling man sits in front of a graph on computer while using his mobile phone.
Opinions

If I were in my 30s I'd buy these ASX shares

These stocks were two of my latest investments.

Read more »