The ASX share market can be a wonderful place to generate monthly passive income.

Yes, ASX dividend shares aren’t going to be as consistent as savings accounts. Share prices do go up and down. Plus, most companies only pay dividends two or four times a year, so investors need to manage their cash flow a little bit.

But, there are a few things that I love about owning ASX shares.

The good ASX shares are capable of growing their dividend payments over time. Capital growth is possible. Juicy dividend yields are out there, though some investors may not need to target higher yields, and the biggest yields may be cut sooner rather than later (they can be called dividend traps).

How to earn $533 each month in passive income

Getting an annual investment income of over $6,000 a year sounds like a great idea to me.

But, it takes saving and time for an investor to build up to that amount. Most households don’t have a cash pile in the six digits just sitting around.

Earning $533 a month, or $6,396 a year, would likely take building up a portfolio worth over $100,000.

At a 5% dividend yield, it would need a portfolio worth around $128,000 to earn the targeted amount of dividend income.

The question is – how do we get to $128,000?

Shares have produced an average return per annum of 10% per annum over the long term. So, investing and achieving that sort of return can do a lot of the financial lifting with compounding.

How much can we invest? That’s down to each investor to figure out. But, assuming we invested $533 a month of saved money from monthly finances while the portfolio grew at 10% per annum, we’d reach $128,000 in less than 12 years.

Investing more cash each month would achieve the goal of passive income quicker.

Which ASX dividend shares have a 5% dividend yield?

There are a wide number of options that have a good dividend yield, but it could be worthwhile to find ideas that can deliver earnings growth which can help fund dividends, and hopefully lead to share price growth.

Using estimates on Commsec, the following businesses are expected to have a grossed-up (including franking credits) dividend yield of at least 5% for FY23:

Bunnings and Kmart owner Wesfarmers Ltd (ASX: WES) could pay a grossed-up dividend yield of 5.6%.

Telstra Group Ltd (ASX: TLS) could pay a grossed-up dividend yield of 6%.

Pinnacle Investment Management Group Ltd (ASX: PNI) could pay a grossed-up dividend yield of 5.4%.

Centuria Industrial REIT (ASX: CIP) could pay a distribution yield of 5%.

Foolish takeaway

I believe the long-term outlook for ASX shares is still very positive, even if the short-term is a bit uncertain.

I’m working on my own portfolio for growing passive income. Hopefully one day I’ll have enough to replace a lot of my worked earnings.

The post ASX investors: How to earn $533 each month in passive income appeared first on The Motley Fool Australia.

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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 positions in and has recommended Pinnacle Investment Management Group. The Motley Fool Australia has positions in and has recommended Pinnacle Investment Management Group, Telstra Group, and Wesfarmers. 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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