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How to earn $5,000 every month from ASX shares

Earning an income from ASX shares every month of the year can certainly help you to organise your money. After all, this is easier to do when you have a steady income throughout the year as opposed to a couple of large lump sums paid 6 months apart. 

However, many ASX shares pay their dividends around the same time as each other. This can make it difficult to find an income source for the remaining months of the year. 

Luckily, I’ve done some digging and found a combination of quality ASX shares which solves this problem. And with the right investment amount, you could earn a $5,000 income every month of the year by investing in these ASX shares (subject to the dividend payments being maintained, of course).

$5,000 income for January, April, July and October

Most companies on the ASX only pay a dividend every 6 months. However, some offer dividends paid out quarterly.

The Vanguard Australian Shares High Yield ETF (ASX: VHY) provides exposure to a range of high-yielding dividend shares on the ASX. This diverse group includes large miners, telcos and of course, the big banks. 

Although many of these companies are likely to cut their dividends in the short term, as evidenced by VHY’s reduced April 2020 payment, I would still estimate this ETF being capable of providing a forward yield of around 5.2%, not including franking credits. 

This would mean that to earn $5,000 for each of these 4 months (a total of $20,000), you’d need to make an investment of $384,615 into the ETF on current prices.

$5,000 income for February, May, August and November

Rural Funds Group (ASX: RFF) is another company to offer quarterly dividends. Although it pays a dividend on the last day of the previous month to those listed above, I’m still happy to include this in our list for these months’ income. After all, what is 1 day?

Rural Funds has historically provided reliable income to shareholders, even recently increasing its dividend after reaffirming guidance last month.

This means its shares now offer a forward yield of approximately 5.8% on current prices. So, an investment of $344,828 today would give you an income of $5,000 for each of these 4 months based on this forward yield.

$5,000 income for March and September

Income for the months of March and September can be provided by Telstra Corporation Ltd (ASX: TLS). Telstra is one of Australia’s largest companies with a relatively defensive nature. Historically, it has been a strong dividend payer despite semi-recent cuts being made thanks to a decline in profit due to the impact of the NBN.

Despite those dividend cuts, I believe the company’s defensive nature and cost-cutting strategies positions it for continued dividend payments. Telstra shares currently trade on a trailing dividend yield of 5.3% (inclusive of the NBN special dividend). So, an investment of $188,679 would be required to earn $5,000 in income for both March and September based on this trailing yield.

$5,000 income for June and December

Westpac Banking Corp (ASX: WBC) pays shareholder dividends in June and December. There has recently been a lot of uncertainty surrounding the dividend future of the big 4 banks. However, while the RBA is encouraging a reduction, it is comfortable for the banks to continue paying dividends.

If we assume the broker consensus estimate for FY21 dividends of $1.42, Westpac shares currently trade with a forward dividend yield of 9.2%. Meaning, an investment in Westpac of $108,696 would be required to receive $5,000 in both June and December – assuming the consensus estimates and dividends are equally split across the 2 months.

Foolish takeaway

Putting all of these investments together would require an initial investment of $1,026,818. A substantial amount to be sure, but it would provide you with $5,000 of income every month based on current prices and dividend estimates. Plus a strong chance of these dividends growing over time.

Of course, you’ll be able to find higher-yielding ASX shares to buy right now. But they may run a greater risk of experiencing dividend cuts or provide an unevenly distributed income. In any case, it’s important to remember that dividend payments are in no way guaranteed, especially in the current highly uncertain environment.

The 4 ASX shares (and amounts) above are just 1 example. And ideally, you would diversify each month’s income even further, with a number of different shares providing the income.

Nonetheless, I believe these 4 are relatively well-diversified from each other and provide an evenly spread stream of income, which could help you to manage your cash flow.

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Motley Fool contributor Michael Tonon owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED and Telstra 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.

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