I really like investing in ASX stocks that I think can make me wealthier through both capital growth and passive income.
While I'm not necessarily looking for businesses with a particularly high dividend yield, I do like to receive some sort of dividend payment. Cash payments are a nice way to benefit from the underlying growth of a business without having to sell and also access some of the franking credits that are generated when Australian companies pay income tax.
The ASX stock that really ticks the boxes for my portfolio right now is MFF Capital Investments Ltd (ASX: MFF). For most of its life, it was purely a listed investment company (LIC), but it now has an operating side after acquiring the fund manager Montaka.
Let me explain why I like it so much.
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Great investment returns with a low fee
MFF aims to own a portfolio of at least 20 stocks, focusing on businesses with attractive characteristics at a discount to their assessed intrinsic values while minimising the risk of permanent capital loss.
With that in mind, MFF's portfolio includes some of the world's strongest businesses in their industries, which make big profits and have clear potential for further growth.
Some of the biggest positions in the portfolio include Alphabet, Amazon, Mastercard, Visa, Meta Platforms, American Express, Bank of America, Home Depot, and Microsoft.
The MFF portfolio has delivered strong (double-digit) returns, and I believe it can continue to do so when I consider how that group of companies is growing its global earnings and developing new products (such as AI). However, past performance is not a guarantee of future returns.
With the acquisition of Montaka, I think MFF could invest in additional stocks that the Montaka investment team likes, such as KKR, which could add to and diversify MFF's returns.
Investors normally have to pay a decent amount in fees to access an active fund manager who creates a quality portfolio like this. According to MFF, its expenses (excluding income tax and interest) were 0.2% of its net assets in FY24, which I'd call low. As MFF gets bigger, the expenses could become even smaller as a percentage of assets.
Appealing dividend
In the recent FY25 half-year result, the MFF board decided to hike the interim dividend payout by 33% to 8 cents per share. At the current MFF share price, that works out to be an annualised grossed-up dividend yield of approximately 5%, including franking credits.
The ASX stock's large profit reserve and franking credit balance suggest to me the company can continue growing the dividend for the foreseeable future, assuming the ongoing net investment returns remain at least decent.
As a bonus, I would like to be able to buy this ASX stock at a discount to its (pre-tax) net tangible assets (NTA). At 14 February 2025, it had a pre-tax NTA of $5.25, so its share price is trading at a decent discount.
