The S&P/ASX 200 Index (ASX: XJO) provides some great opportunities to earn a regular passive income.

Especially with the franking credits that many of the top dividend-paying ASX shares offer. You simply won’t find those kinds of potential tax benefits on most international exchanges.

If I were aiming to invest $20,000 for passive income right now, I’d target some of the big ASX 200 energy stocks.

Energy markets are certainly changing, with an ever greater focus on renewables. But the past few years have highlighted the vital role that coal, oil, and gas continue to play in the global energy mix. And I believe that’s highly unlikely to change any time soon.

Now before diving in, take note that the dividend yields we’ll be looking at are trailing yields, backwards-looking by definition. Future yields may be higher or lower depending on a range of company-specific and macroeconomic factors.

With that said, the first ASX 200 share I’d target for passive income is coal stock Yancoal Australia Ltd (ASX: YAL).

Harvesting passive income from black gold and Texas tea

The Yancoal share price has edged lower in 2023, down 6% amid slipping thermal and coking coal prices.

The retrace to $5.34 a share at the time of writing could provide a good entry point to lock in that passive income.

Yancoal paid an interim dividend of 52.7 cents per share on 20 September as profits soared on the back of record-high thermal coal prices. The coal stock delivered a final dividend of 70 cents per share on 28 March. Both were fully franked.

That works out to $1.227 per share in passive income and a whopping trailing yield of 22.7%.

The second ASX 200 energy stock I’d tap for its impressive, fully-franked dividend potential is oil and gas stock Woodside Energy Group Ltd (ASX: WDS).

The Woodside share price has also slipped this year, down 4% amid lower crude oil prices.

As with Yancoal, with Woodside currently trading at $34.32, the passive income potential looks appealing.

Woodside paid an interim dividend of $1.60 per share on 6 October. The all-time high final dividend of $2.154 landed in shareholder bank accounts on 5 April.

That equates to a total dividend payout of $3.754 for a trailing yield of 11.0%.

Dividend income

I’d invest my $20,000 evenly between the two ASX 200 energy shares, giving me pure exposure to the oil and gas sector from Woodside and the coal sector from Yancoal.

That would see me earning an average yield of 16.85%. Or a very welcome $3,370 in passive income hitting my bank account, with potential benefits come tax time.

The post How I’d invest $20,000 today for a $3,370 passive income appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• 2 ASX coal shares with dividend yields over 20%: Are they for real?
• How might this news out of China impact the oil price?
• 5 things to watch on the ASX 200 on Wednesday
• How to invest $10,000 in ASX dividend shares in May

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 no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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