Start generating extra income by investing $5 a day in ASX shares. Here’s how

There are plenty of ASX shares that pay dividends to investors. The great thing about investing in businesses is that we can start building wealth with a small amount of money.

Think about how much money is needed to invest in a property. The deposit alone can be tens of thousands of dollars, or even over a hundred thousand dollars. It can take a long time to save up that amount of money.

We still need to do a bit of saving to invest in ASX shares. Most brokers require a minimum of $500 to invest. Saving $5 a day, which is hopefully achievable for nearly everyone, would take 100 days to reach that minimum number. However, it may be better to wait to invest until the amount is closer to $1,000.

These days, we can earn a decent return on savings in the banks, so we’re not missing out too much by building towards a goal.

Building a second income with ASX dividend shares

The key wealth-building tool for most people is their job, or business if they run a business.

But, it’s also possible to build another source of income from ASX shares with dividends.

Dividends are simply the portion of the profits companies pay out each year to the owners of the business (shareholders).

By saving $5 a day, someone can save $1,825 a year. I think that number, or even $1,000, would be a great starting point for a beginner investor.

A $1,825 investment with a 6% dividend yield would turn into around $110 of income. So, a few years of investing could turn into a sizeable amount of annual dividend income – hundreds of dollars a year, or even thousands.

Which ASX shares pay sizeable dividends?

Australia’s largest telco Telstra Group Ltd (ASX: TLS), is starting to grow its dividend again. It’s expected to pay a grossed-up yield of 6% in FY23, according to Commsec.

Another business, Coles Group Ltd (ASX: COL), is expected to pay a grossed-up dividend yield of 5.4% in FY23, according to Commsec.

Westpac Banking Corp (ASX: WBC) is projected to pay a grossed-up dividend yield of 8.5% in FY23, according to Commsec.

JB Hi-Fi Limited (ASX: JBH) shares are forecast to pay a grossed-up dividend yield of 8.75% in FY23, according to Commsec.

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More reading

• Why all eyes will be on Telstra shares this week
• I’m racing to buy dirt-cheap ASX dividend shares before it’s too late
• 3 ASX 200 shares in the spotlight for 2023 as consumer sentiment ‘bounces’
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Why is the Telstra share price lagging the ASX 200 today?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group and Telstra Group. The Motley Fool Australia has recommended Jb Hi-Fi and Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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