Investing $10k in Westpac shares could generate substantial passive income

Investing in S&P/ASX 200 Index (ASX: XJO) dividend shares can be a simple way of creating a passive income stream. Take Westpac Banking Corp (ASX: WBC) shares as an example.

Here’s how much a $10,000 investment in the ASX 200 big four bank stock could bring in in dividends.

Passive income

The Westpac share price last closed at $21.89. At that price, a $10,000 investment would see an investor walk away with 456 stocks and around $20 change (perhaps enough to cover brokerage fees).

Looking ahead, each Westpac share could bring in $1.53 of dividend income in financial year 2023, according to Morgans analysts.

Multiply $1.53 by 456 shares and you get $697.68. That may be how much passive income a $10,000 investment in Westpac shares could generate in the near term.

Could Westpac shares also provide capital gains?

And dividends may not be the only benefit an investor might receive from Westpac shares. The bank’s stock could provide capital gains as well.

It hit a 52-week high of $24.67 in April 2022. If it could rebound to such levels, a $10,000 investment today could be worth $12,617.52 in the future.

But brokers Morgans and Goldman Sachs are hopeful it could surpass that.

They have respective price targets of $25.80 and $27.74 on the stock – marking a potential upside of between 18% and 27%.

Though, there’s no guarantee the stock will provide gains in the future.

Particularly given investor sentiment towards the banking sector may have been dinted by a series of collapses among international banks last month.

What risks might face Westpac shares?

Of course, rocky investor sentiment brings about certain risks.

Though, Goldman Sachs ran its ruler over the Aussie banking sphere last month, giving it the thumbs up, as my Fool colleague James reports.

Beyond that, successive interest rate hikes from the Reserve Bank of Australia (RBA) have bolstered the bank’s net interest income. That could change in the coming years, potentially dragging on Westpac’s earnings and, in turn, its share price.

Diversification is key

One of the best ways to balance the risks and rewards of investing — in general — is to build a diverse portfolio.

Thus, I think anyone looking to buy Westpac shares would be wise to also consider investing in other stocks to better protect against single-sector or company downturns.

The post Investing $10k in Westpac shares could generate substantial passive income appeared first on The Motley Fool Australia.

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More reading

• Could buying Westpac shares at under $22 make me rich?
• 3 Warren Buffett tips on how to invest in ASX 200 banks
• Buy these ASX 200 shares for massive dividends: analysts
• Why was the Westpac share price sold off in March?
• Does the Westpac share price fall make it a no-brainer buy?

Motley Fool contributor Brooke Cooper 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 Goldman Sachs Group. The Motley Fool Australia has recommended 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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