With no savings at 35, I’d buy this ASX 200 dividend stock to start earning monthly passive income

S&P/ASX 200 Index (ASX: XJO) dividend stocks can be a great way to earn passive income.

But not every blue-chip, dividend-paying company is created equal.

If I was 35 with little to no savings, I’d be sure to run my slide rule across the range of ASX 200 dividend stocks to avoid any potential dividend traps.

That’s because the yields you see commonly quoted are trailing yields. Meaning they’re derived from the past 12 months of dividend payouts and calculated at the current share price.

One way you can stumble into a dividend trap is if the share price has taken a big fall in recent months. That will make the yield from the past year’s payouts look more impressive than it may be.

Dividend traps often arise when a company’s earnings and profits come under pressure. In that case, it may well slash its dividend payouts in the year ahead, atop seeing its share price retrace.

Which, of course, we want to avoid.

With that said…

I’d buy this ASX 200 dividend stock to start earning monthly passive income

Commonwealth Bank of Australia (ASX: CBA) has long been high on the list of investors seeking passive income from their ASX 200 dividend stocks.

And for good reasons.

CommBank is the biggest bank stock, with a lengthy track record of share price gains and twice-yearly, fully franked dividend payouts. Even during the pandemic addled year of 2020.

On the share price front, as you can see in the graph below, CBA has managed to deliver a healthy 11% gain over the past full year. Longer term, shares in the big four bank are up 49% over five years.

The share price outlook is important because I’d want to avoid investing in an ASX 200 dividend stock that’s losing value over time.

As for the income stream, CBA shares currently pay a trailing dividend yield of 3.6%, fully franked.

And that yield could well increase in the year ahead.

According to analysts at Morgan Stanley, CBA looks set to increase its dividend payouts in the year ahead to $4.50 per share.

That’s up 17% from the $3.85 per share paid out in the year gone by. It’s also the biggest boost in dividend payouts the analysts foresee from any of the big four banks.

If I were to invest at yesterday’s closing price, that works out to a forecast, fully franked yield of 4.1%.

Which is why this is the ASX 200 dividend stock I’d be buying at 35 to start earning monthly passive income and build up some savings.

The post With no savings at 35, I’d buy this ASX 200 dividend stock to start earning monthly passive income appeared first on The Motley Fool Australia.

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More reading

• I’m listening to Warren Buffett and buying ASX shares at deep discounts
• With interest rates heading higher again, the risk is to the downside for these popular blue chip ASX shares
• Should I buy CBA shares for 2023 dividend potential?
• ASX 200: Buy high and sell higher
• Own CBA shares? Here’s the bank’s half-year results preview

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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