Category: Stock Market

The ASX could be one of the best places to find investment income. Plenty of S&P/ASX 200 Index (ASX: XJO) dividend shares have attractive dividend yields.

Term deposit interest rates have jumped higher thanks to the interest rate hikes by the Reserve Bank of Australia (RBA).

One of the main attractions of salary earnings is that it’s consistent. Boring dividends may not be exciting, but they may be what some people need if they’re relying on the dividend income.

Fund manager Michael O’Neill from Investors Mutual points to evidence that dividends can provide more reliable returns than capital gains because dividend income is “decided by the company’s board and is generally a reflection of the company’s overall profitability”.

He suggested that “an investor’s dividends should stay much the same if they have a diversified portfolio made up of quality companies.”

Which ASX 200 dividend shares can provide resilient income?

The fund manager said that Investors Mutual prefers industrial businesses for long-term, consistently high dividends, while also trying to find ones that can provide a steady or growing dividend in this high inflation environment.

There are a few different things that the fund manager suggests could mean good performance during high inflation:

One factor is pricing power – “their strong market position gives them the ability to pass on rising costs to their customers e.g. home and motor insurance companies like Suncorp Group Ltd (ASX: SUN).”

Another suggestion was that the potential dividend players should be in a rational industry – “the main players are motivated by profit and act ‘rationally’ to maximise long-term profits – not spending large amounts of capital at the top of the cycle, or chasing market share at all costs through unprofitable discounting. The explosives industry for example has rationalised significantly and is at a strong point in the capital cycle, benefitting companies like Orica Ltd (ASX: ORI).”

The third idea was related to businesses that sell essential products and services – “people need to buy them, no matter how high prices go e.g. consumer staples companies like Metcash Limited (ASX: MTS).”

Finally, O’Neill suggested that potential ASX 200 dividend shares need to have “capable, proactive management that can put well-structured contracts in place that make difficult conversations about passing on inflationary costs easier. Ideally, contracts are structured with adjustments for inflation and pass-through of essential input costs such as fuel. Aurizon Holdings Ltd (ASX: AZJ) benefits from such contractual protections.”

Financial estimates

Seeing as we’re currently in the 2023 financial year, let’s have a look at the FY23 projections on Commsec.

Suncorp shares are valued at under 12 times FY23’s estimated earnings, with a possible grossed-up dividend yield of 9%.

Orica shares are valued at 19 times FY23’s estimated earnings with a potential dividend yield of 2.75%.

Metcash shares are valued at 13 times FY23’s estimated earnings with a possible grossed-up dividend yield of 7.8%.

Aurizon shares are priced at under 14 times FY23’s estimated earnings with a potential grossed-up dividend yield of 7.7%.

The post When it comes to ASX 200 dividend shares, is boring better? appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• ASX 200 lifts despite latest Aussie inflation data
• What’s the outlook for ASX 200 gold shares in 2023?
• ‘High cash conversion’: 2 ASX shares to buy before they rocket even more
• 5 things to watch on the ASX 200 on Wednesday

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 Aurizon and Metcash. 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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The S&P/ASX 200 Index (ASX: XJO) has shaken off the malaise of yesterday and is pushing decisively higher so far this Wednesday. That’s despite the latest figures from the Australian Bureau of Statistics indicating that inflation is showing no signs of slowing down just yet. 

At the time of writing, the ASX 200 has gained a healthy 0.96%, which puts the index at around 7,200 points. 

So let’s now delve a little deeper into these share market moves by taking a glance at the ASX 200 shares currently topping the share market’s trading volume charts, according to investing.com.

The 3 most traded ASX 200 shares by volume this Wednesday

South32 Ltd (ASX: S32)

First up today is the mining giant South32. This Wednesday has seen a notable 11.08 million South32 shares change hands as it currently stands. There has been no major news or announcements from this company during today’s session.

As such, we can probably put this elevated volume down to the share price movements that we’ve seen today. The South32 share price is currently up a decent 1.7% at $4.52 a share, which is enough to see this company at the top of the ASX 200’s trading volume charts today.

AMP Ltd (ASX: AMP)

Next up is ASX 200 financial services provider AMP. Today’s session has seen a significant 12.3 million AMP shares fly around the share market. We haven’t had any fresh news out of AMP either.

But this company’s shares are also in investors’ good books this Wednesday, it seems. At present, the AMP share price has put on a pleasing 2.76% up to $1.30 a share. Again, it’s probably this move that is resulting in so many AMP shares flying around.

Pilbara Minerals Ltd (ASX: PLS)

Our final and most traded share this Wednesday is none other than ASX 200 lithium star Pilbara Minerals. During today’s trading, a hefty 18.65 million Pilbara shares have been bought and sold thus far.

Once again, it seems a fast-rising share price is to thank for this high volume. Pilbara shares have pleasingly posted a 3.49% rise at this point of the day. That lifts the Pilbara share price to a flat $4. This company has now gained an impressive 10.64% in 2023 to date.

The post Here are the 3 most heavily traded ASX 200 shares on Wednesday appeared first on The Motley Fool Australia.

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More reading

• ASX 200 lifts despite latest Aussie inflation data
• Top brokers name 3 ASX shares to buy today
• 3 ASX 200 lithium shares brokers just upgraded to ‘buy’
• Why Allkem, Pilbara Minerals, Talga, and Westgold shares are storming higher today
• Will 2023 be a golden year for ASX 200 mining shares?

Motley Fool contributor Sebastian Bowen 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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It’s likely many ASX fans have entered the new year with new investing resolutions. No doubt, a common one is to build passive income.

Passive income is a relatively self-explanatory concept. It’s income that a person receives without actively earning it. If you’re anything like me, that’s an appealing reason to invest.

Fortunately, I believe creating an income by investing in ASX dividend shares doesn’t have to break the bank. If I had just $15 a day, here’s how I would aim to build a passive income, starting in 2023.

How I would build a passive income with $15 a day

While $15 a day might not get you lunch at a café, it can add up over weeks, months, and years. Indeed, $15 a day equates to around $456 a month, or $5,475 a year.

The Vangaurd Australian Shares Index ETF (ASX: VAS) – an exchange-traded fund (ETF) tracking the S&P/ASX 300 Index (ASX: XKO) – currently offers a 4.3% dividend yield.

However, I think I could do better than that. Last year’s downturn has likely left many shares trading below their fair value, and potentially boasting notable dividend yields.

Could I use 2022’s downturn to supercharge my returns?

Plenty of ASX 300 shares are currently trading with dividend yields of around 6.5% following 2022’s downturn.

Indeed, Bank of Queensland Limited (ASX: BOQ), DEXUS Property Group (ASX: DXS), Nick Scali Limited (ASX: NCK), and Codan Limited (ASX: CDA) currently boast an average dividend yield of approximately 6.5%.

In building my own portfolio, I might seek out a diverse set of stocks I believe could offer consistent dividends, yielding around 6.5%. Of course, such a feat cannot be guaranteed.

To give myself the best chance, I would look for companies I personally believe can outperform over the coming years. I would also pay close attention to their cash flows and balance sheets, as such factors can make or break dividends in the years to come.

Assuming I could build a portfolio capable of offering a 6.5% dividend yield, the $5,475 I could invest over the course of 2023 (at $15 a day) would be capable of providing $355.87 of passive income.

If I were to continue investing $15 a day for the next 20 years, I could hold a $109,500 portfolio, able to provide $7,117.50 of passive income each year.

Now, if I were to be handed $7,117.50 in cash every 12 months, I wouldn’t say no.

However, if I was aiming to build a passive income, I probably wouldn’t take my dividends as spending money. Instead, I’d aim to compound them.

The power of compounding

If I were to reinvest such dividends into my portfolio, assuming I don’t recognise share price gains, I could boast a $214,059 nest egg in 20 years’ time.

That would be capable of providing $13,913.83 in passive income annually at a 6.5% dividend yield.

That’s certainly worth $15 a day, in my opinion.

The post My $15 a day plan to build passive income this year appeared first on The Motley Fool Australia.

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More reading

• Can ASX bank shares deliver in 2023 after higher interest rates?
• Should I buy Bank of Queensland shares for passive income?
• I think these are the 10 best ASX shares to buy for 2023
• 3 ASX shares I’d buy after each fell by over 30% this year
• Why Bank of Queensland, Block, Fletcher Building, and Newcrest are dropping today

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 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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If you’re looking for dividend shares to add to your income portfolio, then it could be a good idea to check out the two named below.

These two ASX 200 dividend shares have been rated as buys by analysts at Morgans. Here’s what they are saying about them right now:

QBE Insurance Group Ltd (ASX: QBE)

The first ASX 200 dividend share that Morgans has named as a buy for investors is insurance giant QBE. Its analysts currently have an add rating and $14.89 price target on its shares.

Morgans revealed that it is expecting “QBE’s earnings profile to improve strongly over the next few years.”

Its analysts expect this to be driven by “strong rate increases still flowing through QBE’s insurance book, and further cost-out benefits.”

In respect to dividends, the broker is forecasting a 42 cents per share dividend in FY 2022 and then a 90 cents per share dividend in FY 2023. Based on the latest QBE share price of $12.88, this equates to yields of 3.25% and 7%, respectively.

Santos Ltd (ASX: STO)

Another ASX 200 dividend share that Morgans rates highly is this leading energy producer. The broker currently has an add rating and $9.00 price target on its shares.

Morgans likes Santos due to its “growth profile and diversified earnings base” which it feels leaves the company “well placed to outperform against a backdrop of a broader sector recovery.”

The broker is expecting this to allow the company to pay dividends per share of 23 cents in FY 2022 and then 24.4 cents in FY 2023. Based on the current Santos share price of $7.06, this will mean yields of 3.25% and 3.45%, respectively, for income investors.

The post Morgans names 2 ASX 200 dividend shares to buy now appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• 5 things to watch on the ASX 200 on Monday
• How are ASX 200 energy shares tracking in the first week of trade?
• Why BHP, Core Lithium, Santos, and Winsome shares are charging higher
• Is the party over for these ASX 200 energy shares in 2023?

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.

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If you’re wanting to build a strong portfolio, then having a few blue chips in there could give you a great foundation.

But which blue chip ASX 200 shares could be in the buy zone? Here are two to consider:

Goodman Group (ASX: GMG)

The first blue chip ASX 200 share that could be a buy is this leading integrated commercial and industrial property company.

Goodman has been growing at a strong rate for many years thanks to the success of its strategy of developing high quality industrial properties in strategic locations.

The good news is that Citi expects this strategy to deliver further solid growth in the coming years. Particularly given the strong demand for industrial property. As a result, It has put a buy rating and $23.50 price target on its shares.

In response to Goodman’s first quarter update, the broker said:

[W]e believe the key positive to come out of today’s update was the fact that asset values are rising despite higher cap rates. We therefore continue to favour industrial exposure, and remain attracted to GMG’s best-in-class balance sheet. We continue to see potential for upside to guidance, and retain Buy on GMG

National Australia Bank Ltd (ASX: NAB)

Another ASX 200 blue chip share to consider this month is NAB.

It is of course one of Australia’s big four banks, offering a comprehensive and integrated range of banking and financial services.

Goldman Sachs is a fan of NAB due to its exposure to commercial lending, which it believes will perform better than home lending in the current economic environment. The broker has a buy rating and $34.81 price target on the banking giant’s shares.

Its analysts explained why NAB could be a top option for investors right now. They said:

Our Buy rating on NAB is predicated on: i) NAB providing the best leverage to the thematic that domestic volume momentum will favour commercial over housing volumes over both the short- and medium-term, ii) our expectation that commercial lending will be better insulated from competitive pressures particularly prevalent in mortgage lending, iii) NAB’s cost management initiatives, which seem further progressed vs. peers, has allowed it to deliver the highest levels of productivity over the last three years, and we think this leaves it well positioned for an environment of elevated inflationary pressure.

The post Buy these strong blue chip ASX 200 shares now: analysts appeared first on The Motley Fool Australia.

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More reading

• My 3 best ASX shares of 2022 – and why I think they’ll win again in 2023
• Can ASX bank shares deliver in 2023 after higher interest rates?
• How different is the Vanguard Australian Shares Index ETF (VAS) now compared to a year ago?
• Buy NAB and this ASX dividend share for a passive income boost: analysts
• Will 2023 get better for ASX 200 shares?

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.

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Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a number of broker notes this week.

Three ASX shares brokers have named as buys this week are listed below. Here’s why they are bullish on them:

ANZ Group Holdings Ltd (ASX: ANZ)

According to a note out of Citi, its analysts have retained their buy rating and $29.25 price target on this banking giant’s shares. While the broker is positive on the banking sector, it is particularly positive on ANZ’s outlook. So much so, the broker has made the bank its new top pick in the sector. Citi notes that this has been driven by the re-emergence of key structural tailwinds in the key Institutional division. The ANZ share price is fetching $23.89 on Wednesday.

Calix Ltd (ASX: CXL)

A note out of Bell Potter reveals that its analysts have retained their speculative buy rating and $9.00 price target on this environmental technology company’s shares. The broker believes 2023 will be another catalyst-rich and important year for Calix. The broker also highlights the company’s growing suite of applications which target global challenges, including decarbonisation of hard-to-abate industrial processes. The Calix share price is trading at $4.88 this afternoon.

Pilbara Minerals Ltd (ASX: PLS)

Another note out of Citi reveals that its analysts have upgraded this lithium miner’s shares to a buy rating with a $4.70 price target. The broker made the move on valuation grounds after a significant pullback since November. The broker believes this correction is overdone, particularly given its belief that spot spodumene prices may hold at +US$7000 per tonne for longer than the market expects. The Pilbara Minerals share price is fetching $4.01 today.

The post Top brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

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More reading

• 3 ASX 200 lithium shares brokers just upgraded to ‘buy’
• Why Allkem, Pilbara Minerals, Talga, and Westgold shares are storming higher today
• Will 2023 be a golden year for ASX 200 mining shares?
• ‘Correction is overdone’: broker upgrades Pilbara Minerals shares to buy
• Here are the 3 most heavily traded ASX 200 shares on Tuesday

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.

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The S&P/ASX 200 Index (ASX: XJO) is having a rather cracking Wednesday so far this session. At the time of writing, the ASX 200 has lifted by 0.97% to just over 7,200 points. But the BHP Group Ltd (ASX: BHP) is faring even better.

BHP shares are on fire today. The ASX’s largest company is up a pleasing 2.18% to $48.84 a share at present. This leaves the mining giant at a 7.74% year-to-date gain in 2023 thus far. Not bad at all considering we are only 11 days into the new year.

Not only that, BHP shares hit a new high of $49.93 this afternoon. Not only is that a new 52-week high for the BHP share price, but it is also a new, all-time, record high for the Big Australian. That’s a pretty big deal, considering BHP has been around for more than 170 years.

So what has lifted ASX investors’ sentiments on BHP shares so dramatically this Wednesday?

Well, in all likelihood, it appears that a sharp increase in BHP’s primary commodity – iron ore – is mostly responsible for these gains.

Iron ore up, dollar down: Why BHP shares just hit a new record high

As my Fool colleague James reported this morning, iron ore has just rocketed a healthy 3.1% higher to US$121.95 per tonne, amid “hopes that China’s reopening will lead to an increase in demand for the base metal”.

BHP is one of the world’s lowest-cost iron ore miners. As such, any increase in the price it receives for its iron ore can boost its profitability by multiples of the underlying rise in the commodity itself. In other words, higher iron prices mean even higher profits for BHP.

Another factor that could be working in BHP’s favour is the Australian dollar. As an exporter, BHP benefits when the Aussie dollar falls in value against other currencies, particularly the US dollar. And over this week so far, we have indeed seen such a fall.

On Monday, the Aussie was trading as high as 69.5 US cents. But as of today, it has slipped slightly to almost bang on 69 cents. That’s another factor working in the BHP share price’s favour.

So it’s perhaps no wonder investors have sent the BHP share price to a new record high today after such a strong rise in its core commodity. As the ASX 200’s largest share, there won’t be too many Australians unhappy with this news.

The post Why did the BHP share price just hit a new, all-time high? appeared first on The Motley Fool Australia.

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More reading

• Will 2023 be a golden year for ASX 200 mining shares?
• What’s the outlook for ASX 200 gold shares in 2023?
• ‘High cash conversion’: 2 ASX shares to buy before they rocket even more
• 5 things to watch on the ASX 200 on Wednesday
• Broker reveals ASX 200 share with earnings expected to halve

Motley Fool contributor Sebastian Bowen 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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The S&P/ASX 200 Index (ASX: XJO) is back on form on Wednesday. In afternoon trade, the benchmark index is up 1% to 7,202 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are dropping:

European Lithium Ltd (ASX: EUR)

The European Lithium share price is down almost 4% to 7.7 cents. This morning this lithium explorer announced that its Wolfsberg Lithium project in Austria has a net prevent value of US$1.5 billion based on measured and indicated resource of 9.7 million tonnes at 1% Li2O. However, this afternoon, the company retracted its announcement and told investors to wait for its definitive feasibility study at the end of the current quarter.

PEXA Group Ltd (ASX: PXA)

The PEXA share price is down 2.5% to $12.00. Yesterday was the date of the transfer of PEXA shares to eligible Link Administration Holdings Ltd (ASX: LNK) shareholders. Some investors may have decided to sell these on-market today.

Polynovo Ltd (ASX: PNV)

The PolyNovo share price is down 2.5% to $2.44. This is despite there being no news out of the medical device company. However, prior to today, the PolyNovo share price was up almost 28% in the space of a month. This may have led to some profit taking from investors on Wednesday.

Xero Limited (ASX: XRO)

The Xero share price is down 3.5% to $69.07. Last week, Citi retained its buy rating but trimmed its price target on the cloud accounting platform provider’s shares to $92.40. This followed news that the UK has delayed its Making Tax Digital initiative by two years to April 2026. Making Tax Digital was expected to be supportive of subscriber growth in the key UK market.

The post Why European Lithium, PEXA, PolyNovo, and Xero shares are dropping today appeared first on The Motley Fool Australia.

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More reading

• Why Lake Resources, Platinum, Polynovo, and Volpara shares are charging higher
• 2 ASX All Ords shares cracking new 52-week highs on Tuesday
• 3 ASX 200 tech shares with mission-critical products
• The Xero share price tumbled 50% in 2022. Can 2023 bring a recovery?
• My top predictions for ASX 200 shares in 2023

Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended PEXA Group, PolyNovo, and Xero. The Motley Fool Australia has positions in and has recommended Xero. 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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The Australian share market is full steam ahead on Wednesday as the materials sector carries the S&P/ASX 200 Index (ASX: XJO) 0.72% higher. Some of the names heavily aiding in today’s rally are ASX lithium shares.

It appears enthusiasm has returned to a number of popular lithium-producing companies today amid several positive broker ratings. Investors are potentially breathing a collective sigh of relief — at least temporarily — following a tough month for future lithium expectations.

Is it time to buy these ASX 200 lithium shares?

Views are still mixed on what the future looks like for the electrifying commodity, lithium.

Last month, Goldman Sachs shared its belief that lithium prices will begin to disintegrate this year as additional supply hits the market. Meanwhile, other brokers — such as those at Macquarie — are forecasting a sparkling future for the lithium price based on a continued supply shortfall.

Any company that produces a commodity is largely influenced by the price of said commodity. Based on this, Jefferies and Citi must be expecting positive trends for the lightweight metal over the next 12 months based on their latest buy ratings.

Today, analysts at Jefferies have labelled Allkem Ltd (ASX: AKE) and IGO Ltd (ASX: IGO) as buys. Likewise, Citi is optimistic about the road ahead for Pilbara Minerals Ltd (ASX: PLS), assigning this ASX 200 lithium share a buy as well.

Investors are responding with strong buying pressure for these extremely profitable lithium companies. At the time of writing, shares in Allkem, IGO, and Pilbara Minerals are up 5.4%, 4.1%, and 3.8% respectively.

The all-important question is: Will the profits continue to grow to justify the valuations? At the extreme, IGO shares are now trading on a price-to-earnings (P/E) ratio of approximately 32 times. Whereas, the Australian metals and mining industry average hovers around 12 times.

Out of the three ASX 200 lithium shares rated, Allkem trades on the lowest earnings multiple at 17 times. At the same time, the $7.9 billion lithium producer also holds the lowest historical annual earnings growth rate of the three at 23%.

The post 3 ASX 200 lithium shares brokers just upgraded to ‘buy’ appeared first on The Motley Fool Australia.

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More reading

• Why Allkem, Pilbara Minerals, Talga, and Westgold shares are storming higher today
• Will 2023 be a golden year for ASX 200 mining shares?
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• Here are the 3 most heavily traded ASX 200 shares on Tuesday
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Motley Fool contributor Mitchell Lawler 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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Looking to make passive income? ASX shares are one of the best ways to do it. Dividends that investors receive from shares are truly passive income. Dividend payments simply flow through to anyone who owns the shares of the company paying the dividend. No other questions asked.

If a company pays consistent dividends, the cash arrives in your bank account every six months (or more frequently, if you’re lucky) whether you are working or not, whether you are young or old, or sick or healthy.

What’s more, you can start your passive income stream with as little as $50 a week.

Now most ASX brokers charge brokerage costs on any share transaction. So depending on what your preferred broker charges you in brokerage, it might be worthwhile investing $200 every month, rather than $50 a week.

But we’ll still use that as a benchmark.

ASX shares and dividends

Well, unless you hit the jackpot on selecting your shares, it will take time to build up a solid passive income from ASX shares.

Let’s take a broad index fund to illustrate. The iShares Core S&P/ASX 200 ETF (ASX: IOZ) is an exchange-traded fund (ETF) that holds the largest 200 shares listed on the ASX in one simple fund.

That’s everything from Commonwealth Bank of Australia (ASX: CBA), Telstra Group Ltd (ASX: TLS) and BHP Group Ltd (ASX: BHP) to Coles Group Ltd (ASX: COL), Harvey Norman Holdings Limited (ASX: HVN), and Qantas Airways Limited (ASX: QAN).

The way an ETF works is that if a company it holds in its portfolio pays out a dividend, that cash is passed straight through to that ETF’s investors. Thus, it’s something of a representation of all income that comes out of the Australian share market.

So over the past 12 months, the iShares ASX 200 ETF has paid out a total of $1.78 in dividend distributions per unit (shares of ETFs are called units). On the current unit price of $28.88 (at the time of writing), this means that this ETF is currently offering a trailing dividend distribution yield of 6.16%.

So how much passive income will investing $50 a week get you?

So let’s assume that we start investing $50 a week into this ETF from today. In a year’s time, we will have approximately $2,600 invested into the iShares ASX 200 ETF.

If this ETF pays out the same level of dividend distributions over the next 12 months as it has over the past 12, we will receive a total of $160.16 in dividend income.

Now that might not sound like much. But investing takes time and (of course) cash. Say our investor continued to invest $50 a week into this ETF over 10 years. After that 10 years, we would have a total of $26,000 invested, yielding $1,601.60 per year in passive income.

This would be even higher if our investor prudently reinvested their dividend distributions into even more units of the ETF, rather than spending it.

ASX shares also tend to increase their dividends over time. If the iShares ASX 200 ETF increases its dividend distributions by 50% over those 10 years to $2.67 per unit, we would be receiving a total of $2,402.40 in passive income.

All of these amounts can be further boosted by additional investments too.

Creating a meaningful stream of passive income from ASX shares takes time and money. But if you make it a consistent habit over a long period of time, the results can start to become very rewarding.

The post How to make passive income from ASX dividend shares with only $50 a week appeared first on The Motley Fool Australia.

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More reading

• Will 2023 get better for ASX 200 shares?
• Is now really the time to buy ASX 200 shares?

Motley Fool contributor Sebastian Bowen has positions in Telstra Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Harvey Norman. The Motley Fool Australia has positions in and has recommended Coles Group, Harvey Norman, and Telstra Group. 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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