The Motley Fool

Replace your entire wage with dividends from ASX shares

If you’re like me you probably don’t like the idea of working until you’re 70 (or even older). In my opinion, the best way to replace your wage is with dividends from ASX shares.

It’s not easy building the net worth necessary to support yourself and your family, particularly with wage growth and inflation at such low levels at the moment.

I believe that ASX dividend shares are the way to go because some of the best businesses have the ability to keep growing their profit and dividends at an inflation-beating pace to help replace your wage quicker.

The first thing you need to do spend less than you earn so that you can invest money into shares. Then it’s up to you to decide what type of dividend shares you want to go for:

High yield, low growth

If you want to retire as soon as possible then it could be a good idea to invest in higher-yielding shares and build up that income stream as much as possible. It will likely mean paying higher taxes until you get to your financial target, but a higher yield could mean you don’t have to save as much.

For example, a portfolio worth $750,000 with a yield of 6% will create an income of $45,000. But a portfolio worth $1 million will only generate income of $40,000 with a 4% yield.

It’s important to pay attention to the price you pay for high-yielding shares as well as lower yielding ones. Some of the shares at attractive prices with good yields I’d buy are: Rural Funds Group (ASX: RFF), Duxton Water Ltd (ASX: D2O), Future Generation Investment Company Ltd (ASX: FGX) and WAM Leaders Ltd (ASX: WLE).

Lower yield, higher growth

The other option is to consider shares that are growing at a good pace and are re-investing for more growth. It may take longer to reach your total dividend target, but the total returns will probably be better and the growth should continue well after you have reached your income target amount.

Businesses that are likely to grow their income over the long-term that could be worth a look are: Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), WAM Microcap Limited (ASX: WMI), Altium Limited (ASX: ALU), Magellan Global Trust (ASX: MGG) and Webjet Limited (ASX: WEB).

Foolish takeaway

If you keep investing you can definitely replace your wage with ASX dividend shares. I’m using a combination of lower yield and higher yield ideas for my portfolio.

I’ve also got my eyes on these leading ASX dividend shares which could rapidly help replace my working income with dividends.

These 3 Dividend Shares Could Be The Ticket To Wonderful Income

When Edward Vesely -- our resident dividend expert -- has a stock tip, it can pay to listen. With huge winners like Dicker Data (up 147%) and Collins Food (up 105%) under his belt, Edward is building an enviable following amongst investors that are planning for retirement.

In a brand new report, Edward has just revealed what he believes are the 3 best dividend stocks for income-hungry investors to buy now. All 3 stocks are paying growing fully franked dividends giving you the opportunity to combine capital appreciation with attractive dividend yields.

Best of all, Edward’s “Top 3 Dividend Shares To Buy For 2020” report is totally free to all Motley Fool readers.

Click here now to access this free report.

Motley Fool contributor Tristan Harrison owns shares of Altium, DUXTON FPO, FUTURE GEN FPO, MAGLOBTRST UNITS, RURALFUNDS STAPLED, WAM MICRO FPO, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended DUXTON FPO and Webjet 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.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!