The ASX share market is an excellent place to find opportunities that pay dividends and create a second income.
Owning a piece of a business is very rewarding – everyone at that company is working to help generate profit.
By investing in certain stocks, I'm hopeful that I can receive a stream of cash that becomes a significant size of money compared to my work earnings and eventually grows to more than that.
There are plenty of shares to choose from that pay dividends, but I'm looking for a few other things as well.
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Growing dividend
The last few years have shown how important it is to have investments that can help offset inflation.
I want to own a group of investments that have a habit of regularly growing their payout to shareholders. A growing dividend can help organically accelerate the passive income growth towards a certain target. It's obvious, but if the dividend is growing, then it isn't being cut.
If I'm investing for passive income, I want to be confident that those cash payments will continue even during a downturn.
Additionally, a growing dividend could suggest that the underlying earnings are regularly growing, which could translate into capital growth with the ASX share investment.
Long-term investment
I'm not looking to trade in and out of these ASX dividend shares; if things go well with that investment, I want to own them for a long time, possibly forever.
Owning ASX shares for the long term reduces the amount of capital gains tax events and, therefore, reduces how much tax I need to pay because I'm not regularly selling shares and paying over part of my gains to the ATO. It helps keep my capital in my portfolio.
I've already held positions in some of the ASX shares in my portfolio for many years, and I plan to keep them for decades longer and watch the dividends roll in.
The ASX shares I'm buying
So, which stocks have I been buying to unlock the cash flow for a second income?
One of the biggest positions in my portfolio is the investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which has grown its annual ordinary dividend every year since 2000.
Another of my larger positions is the industrial property owner and building products manufacturer Brickworks Limited (ASX: BKW), which also owns a large stake in Soul Pattinson. Brickworks has grown its dividend every year for the past decade.
I also have sizeable (and growing) positions in investment businesses MFF Capital Investments Ltd (ASX: MFF), L1 Long Short Fund Ltd (ASX: LSF) and WAM Microcap Ltd (ASX: WMI).
There are also a few other ASX dividend shares in my portfolio, but these are the core five (at the moment) that make up a large percentage of my dividend portfolio with the aim of a second income.
