When I first started investing in ASX shares, I gravitated towards dividend stocks with large yields. At the time, you could only get a savings account with a yield of around 3.5%. So buying a dividend share with a yield of 4% or 5% seemed like a no-brainer.

However, buying up big-yielding ASX dividend shares is no longer a goal that I pursue in my share portfolio. In fact, most of my recent purchases have been stocks with yields well under what a savings account can provide today.

So why the change of heart? Did I suddenly lose my taste for receiving a sizeable dividend paycheque in the mail?

Hardly.

I love passive dividend income as much as the next investor. Especially if it comes fully franked.

However, I've realised that, as an investor at my age and with my life goals, maximising dividend income isn't the best use of my money today.

I am aiming to compound my money and grow my wealth at the highest rate possible. Dividends are great. But the ASX shares that usually pay the highest dividends right now are companies that are mature, with most of their growth behind them.

Take two of my earliest ASX share buys, National Australia Bank Ltd (ASX: NAB) and Telstra Group Ltd (ASX: TLS). Both are wonderful businesses and remain in my portfolio. However, there's almost no chance I will add to these positions going forward. I might even sell them this year.

These companies are simply not growing at a fast clip anymore. That's why they choose to spend most of their free cash flow paying shareholders dividends and buying back their own stock.

There's nothing wrong with that, of course. It's great for retirees and other investors who rely on big dividend paycheques. But for someone like me who wants to grow their wealth by at least the market's rate of return, I think there are better opportunities elsewhere.

ASX dividend shares: Choosing growth over income

An ASX share I hope to buy soon provides a nice contrast.

TechnologyOne Ltd (ASX: TNE) is an ASX tech stock that has been delivering blistering rates of growth. Sure, it only pays a dividend yield of 0.76% today. However, this company managed to grow its revenues by 17% in FY24 and profits before tax by 18%. Its 2024 dividend payouts grew by 14.87% over what it paid out in 2023.

At 81.97 times earnings, TechnologyOne shares are currently a little too pricey to warrant me buying them. But if I can get these shares at a decent discount, I think they would blow past what NAB or Telstra could net me in total returns.

If I hold these shares for long enough, and that dividend growth rate keeps up, it won't be too long until I'm getting a Telstra-like yield on my cost anyway.

As such, I'd rather have a company that grows its revenues and earnings by double digits every year than one with low single-digit growth, but offers a big dividend yield.