Commonwealth Bank of Australia (ASX: CBA) shares have long been a favourite with passive income investors.
And it is easy to see why. The banking giant generates billions of dollars in profit each year from mortgages, business lending, credit cards, deposits, and other financial services.
But rather than keeping all those profits inside the business, CBA returns a large portion to shareholders through dividends.
Better still, those dividends are fully franked, which can make them particularly attractive to Australian investors.
So, how much would you need to invest in CBA shares to generate $10,000 of passive income each year?
Let’s take a look.
CBA’s dividend outlook
The market is currently expecting the company to deliver earnings per share of $6.67 in FY 2027, followed by $6.86 in FY 2028.
These earnings are expected to support fully franked dividends of $5.15 per share in FY 2027 and $5.30 per share in FY 2028.
At the current CBA share price of $155.25. this represents dividend yields of approximately 3.3% and 3.4%, respectively.
Those are admittedly not the biggest yields available on the Australian share market, but they are no doubt attractive in the current environment.
How many CBA shares would I need?
Let’s use the FY 2027 dividend forecast of $5.15 per share.
To receive $10,000 in cash dividends, an investor would need approximately 1,942 CBA shares.
At the current share price of $155.25, buying that many CBA shares would set you back approximately $301,496.
The fully franked nature of those dividends is worth remembering as well. Assuming an investor can make full use of the franking credits, $10,000 of cash dividends would come with approximately $4,286 of franking credits.
That would give the income a grossed-up value of roughly $14,286 before personal tax. Not bad!
What about in FY 2028?
The numbers improve slightly if CBA’s dividend grows as expected.
Using the forecast FY 2028 dividend of $5.30 per share, an investor would need around 1,887 shares to generate $10,000 of annual cash income.
That would require an investment of approximately $292,957.
Of course, CBA’s share price will almost certainly be different by then and dividends are never guaranteed. But based on current forecasts, the numbers give us a good indication of the scale required.
All in all, for someone wanting $10,000 a year in passive income from CBA shares alone, they will need roughly $300,000 invested at current levels.
The post How much do I need to invest in CBA shares for $10,000 of passive income? appeared first on The Motley Fool Australia.
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Motley Fool contributor James Mickleboro 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.