One of the best things about investing in shares (particularly ASX shares) is the ability to receive dividends. Dividends are one of the best forms of passive income, as they hit your bank account every six months without you having to lift a finger.
So here’s how I would build a passive dividend income portfolio today using a $100,000 lump sum.
SPDR MSCI Australia Select High Dividend Yield Fund (ASX: SYI) – $40,000
SYI is an exchange traded fund that only selects the highest yielding ASX shares (42 at the latest count). Rather than debating which bank or resource giant has the best dividend, this ETF boasts the full range and forms a great backbone for our portfolio. SYI has a trailing yield of 6.1% and comes 87.6% franked, so you get a grossed-up yield of 7.3% with the credits. It’s heavy with the ‘Big Four’ banks but also has Sydney Airport Holdings Pty Ltd (ASX: SYD and Wesfarmers Ltd (ASX: WES).
SPDR S&P Global Dividend Fund (ASX: WDIV) – $30,000
Another ETF, WDIV focuses on global companies that have had stable or increasing dividends for 10 years or more. Like with any portfolio, I believe it is important to get some international exposure and what better way than with companies of this calibre. WDIV contains companies that range from American and Canadian to British and Japanese – so you are really getting some diversity here. Some of WDIV’s top holdings include AT&T, Laurentian Bank of Canada and Philip Morris International. This ETF has a trailing yield of 4.92% but alas, no franking credits with this one.
Washington H. Soul Pattinson & Co. Ltd (ASX: SOL) – $20,000
On the surface, Soul Patts’ current dividend yield of 2.73% doesn’t seem that special. But if I told you that Soul Patts has increased said dividend every year since 2000, hopefully, it changes your perspective! Dividend growth is just as (if not more) important than a high starting yield, so this ASX investment company makes a fine addition to our portfolio.
Transurban Group (ASX: TCL) – $10,000
When it comes to dividends, most investors think that they don’t come more defensive than toll-road king Transurban. With a monopolistic hold on tolled motorways in Sydney and Melbourne and other cities, Transurban can boast infrastructure vital to Australia’s economic prosperity. With such a strong dividend, investors have flocked into TCL shares this year and bid the price way into the stratosphere – hence we are only going to throw 10% of our portfolio into Transurban. But with its 3.9% yield, it remains a formidable income stock.
With this collection of income-producing assets, I am confident we have a robust, future-proof portfolio capable of throwing out a healthy stream of passive cashflow. One of the best things about shares are dividends. Investing is lots of fun, but when you’re getting paid to do it? That might just be the dream.
So for some more fantastic passive income shares, don't miss the Motley Fool's favourites here!
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited, Transurban Group, Washington H. Soul Pattinson and Company Limited, and Wesfarmers Limited. 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.