I think most readers would agree that earning $50,000 of income each year for doing nothing would be highly desirable.
Well, if you have patience, time, and funds to invest, you could potentially make this a reality.
How can you earn $50,000 of income each year from ASX dividend shares?
One way to potentially achieve this is to invest in dividend-paying ASX shares which have strong long-term growth potential.
One example that I like to use to demonstrate how this has been achievable in the past is debt collector Credit Corp Group Limited (ASX: CCP).
There’s nothing particularly revolutionary about the Credit Corp business model. It’s just very good at what it does and operates in a large and growing market.
Ten years ago you could have picked it up for $1.28 per share. Since then its shares have increased dramatically in value and recently reached an all-time high of $27.38.
This strong share price gain has been driven by the company growing its earnings by an average of 20.7% per annum over the last decade.
But that’s not the only thing that has been growing strongly over the period. Credit Corp has grown its dividend at an even quicker pace of 36.8% per annum over the last 10 years.
Pleasingly for shareholders, this dividend is expected to increase again this year. A note out of Morgans in April estimates that Credit Corp will pay a dividend of 75 cents per share fully franked in FY 2019.
This means that if you bought just over $85,000 worth of its shares 10 years ago (approximately 66,667 shares), those shares would yield $50,000 of fully franked dividends this year.
And let’s not forget the incredible capital gains that you would have made over the period after watching its shares rise from $1.28 to $27.38.
But that was then and this is now. Where is the next Credit Corp?
Without a time machine or the DeLorean from Back to the Future, it is impossible to know which shares will do this over the next 10 years.
But I believe you can narrow down the search by looking at shares with strong growth potential, reasonable insider ownership, and favourable dividend policies. And rather than going all-in on one of them, try to spread your investment across a number of options.
One option could be Citadel Group Ltd (ASX: CGL). It is a specialist in managing information in complex environments through integrating know-how, systems and people to provide information on an anywhere-anytime basis. I believe it has outstanding long-term growth potential.
Another option could be content, collaboration, and process management solution provider Objective Corporation Limited (ASX: OCL), which has been growing its dividend strongly for a number of years. And if its shift to a subscription revenue model is a success, this trend could continue for a long time to come.
5 stocks under $5
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Citadel Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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