On the hunt for ASX shares offering passive income?

Well, here’s some good news.

As ASX investors, we have a big leg up on most of our international peers when it comes to passive income.

That’s due to the franking credits received here in Australia on many company dividend payouts.

With fully franked dividends, investors won’t need to pay the taxes the company has already paid on the profits it booked in Australia.

Investors with little to no other sources of income may even receive a tax credit on the franked dividends they received over the financial year come tax time.

So, here’s how I’d go about investing $200 a month in ASX shares to garner $1,000 in passive income.

$1,000 a month in passive income from ASX shares

First, I’d likely restrict myself to the larger end of the market.

S&P/ASX 200 Index (ASX: XJO) dividend shares will usually have longer track records and less volatility than small-cap stocks. There’s also more readily available research on ASX 200 dividend shares.

And when hunting for ASX shares to build my $1,000 passive income stream, I’d stick to the ones paying fully franked dividends.

I’d also want some diversification. This means I wouldn’t want to invest in companies that are all involved in the same sector and subject to the same potential headwinds.

With that said, here are three ASX 200 dividend shares in three very different industries that I’d invest in for passive income.

Banking, retail, and energy

First up we have ASX 200 bank ANZ Group Holdings Ltd (ASX: ANZ).

ANZ currently trades for $24.72 per share and has a market cap north of $74 billion.

The bank’s share price has been trending higher, up 5% in 2023. And it has a lengthy track record of two dividend payments per year, offering historically reliable passive income.

ANZ pays a trailing, fully franked dividend yield of 5.9%.

Next up we have ASX 200 energy stock Woodside Energy Group Ltd (ASX: WDS).

Woodside currently trades for $35.20 per share and has a market cap of $68 billion.

The Woodside share price is down 1% in 2023, largely due to a retrace in the soaring energy prices we witnessed last year. Woodside also has paid two yearly dividends each year going back many years, making it another solid ASX stock to investigate for passive income.

Woodside pays a fully franked trailing dividend yield of 8.9%.

 

Which brings us to ASX 200 retail stock, Harvey Norman Holdings Ltd (ASX: HVN).

Harvey Norman currently trades for $4.15 per share and has a market cap of $5.2 billion.

The Harvey Norman share price has gained 1% so far in 2023. Like the other two ASX 200 dividend shares, it makes my list for passive income in part due to making two annual dividend payouts for well over a decade.

Harvey Norman pays a full franked trailing dividend yield of 9.0%.

 

Foolish takeaway

I won’t build $1,000 of passive income by investing $200 a month in these ASX shares overnight.

And I’d likely look at expanding the list for even more diversification.

But I think these three ASX passive income stocks are a great way to start.

Together they pay an average trailing, fully franked yield of 7.9%.

If those yields remain consistent (they could go higher or lower), it would take me 63 months, or just over five years, to generate $1,000 of passive income from these ASX shares if I bought an equal amount of each. And that’s income that would likely come with some healthy tax benefits.

And that’s not even considering the potential share price gains over that time frame.

For example, over the past five years, the Harvey Norman share price is up 13%; Woodside shares have gained 23%; while the ANZ share price has gone the other way, down 13%.

The post How I’d invest $200 a month in ASX shares to target a $1,000 passive income appeared first on The Motley Fool Australia.

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More reading

• The Woodside dividend has just been boosted by 87%. Here’s what you need to know
• Woodside share price higher on record US$5.23b profit
• Earnings preview: Here are the ASX shares reporting on Monday
• 5 things to watch on the ASX 200 on Monday
• 3 steps to bring in $1,000 per month in passive income

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Harvey Norman. The Motley Fool Australia has positions in and has recommended Harvey Norman. 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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