For $750 in monthly passive income, buy 8,572 shares of this ASX 200 stock

Retired man reclining in hammock with feet up, retire early

Retired man reclining in hammock with feet up, retire early

Some S&P/ASX 200 Index (ASX: XJO) stocks could be very effective Investment choices for passive income. I’m going to talk about Premier Investments Limited (ASX: PMV) shares.

I think this ASX retail share has done a very good job of growing its earnings and dividend over the past decade. Its underlying businesses, like Smiggle and Peter Alexander, have performed well.

The higher earnings and profitability have helped the Premier Investments share price increase by almost 100% over the last five years.

How to make $750 monthly passive income from Premier Investments shares

While hardly any ASX stocks pay dividend income monthly, we can easily divide an annual amount equally into 12 to work out the monthly figure.

To make $750 a month, we need to generate $9,000 of annual passive dividend income.

In FY23, according to Commsec, Premier Investments is expected to pay an annual dividend per share of $1.05, not including the effect of franking credits. That’s a cash dividend yield of 3.85%.

If we owned 8,572 Premier Investments shares, then we’d receive $9,000 of annual passive income of dividends in cash. The franking credits would be a bonus on top of that.

The current Commsec forecast for Premier Investments suggests that the dividend could be increased to $1.06 per share in FY25. At the current Premier Investments share price, that suggests the ASX 200 stock could pay a FY25 cash dividend yield of 3.9%.

If we use the FY25 payout, investors would need to own 8,491 Premier Investments shares to receive $9,000 of annual dividends.

How is the ASX 200 stock performing?

We haven’t heard the company’s FY23 half-year result yet – its reporting period ends in January rather than December, like many other ASX shares. We should see the company’s results later this month.

The latest news we heard was the company’s update announced in early December 2022.

It advised that global sales for the first 17 weeks of the first half of FY23 were up 24.9% compared to the pre-COVID FY20 first-half sales. The company also said that it achieved “record sales” during the year’s Black Friday trading week, including its highest-ever global online sales for a trading week.

The company noted that in weeks 13 to 17 of the first half of FY23, it saw 0.1% growth on the prior corresponding period, this was despite cycling “very strong” sales in the FY22 first half, which benefited from store re-openings and pent-up demand surging after months of lockdowns.

Premier Investments added that it had managed its logistics program effectively and was “fully prepared” for the trading ahead. It also said that it was “well positioned to take full advantage of the current  momentum through the remaining critical first half trading periods of Christmas, Boxing Day and ‘back to school’,

Going back to school is an important time because of Premier Investments’ global school accessories business called Smiggle, which is driving a lot of the overall growth that the company is experiencing.

Premier Investments share price snapshot

According to Commsec, the ASX 200 stock is valued at 17x FY23’s estimated earnings.

The post For $750 in monthly passive income, buy 8,572 shares of this ASX 200 stock 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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia

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