An S&P/ASX 200 Index (ASX: XJO) stock capable of providing $800 of passive dividend income every month with just 1,000 stocks? Sign me up!
It might sound like a pipedream, but it's on offer right now on the Aussie bourse.
The company behind the whopping figure is, of course, Rio Tinto Limited (ASX: RIO). The ASX 200 iron ore share has paid out nearly $9.61 per share in regular dividends – not counting special offerings – in 2022.
That figure also includes a whopping 52% cut to its interim dividend. But Rio Tinto's payouts might be too good to be true.
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All dividends offered by Rio Tinto in 2022
ASX 200 iron ore giant Rio Tinto has paid out $9.61 per share in regular dividends to Aussie investors this year despite tumbling demand for the steel-making commodity.
That means someone holding 1,000 shares in the miner would have received $9,610 in regular passive income – or $800.83 per month. And that's before considering special dividends.
Though, past performance is not indicative of future performance, as I will get to in a moment.
Here's a breakdown of all the offerings put on the table by Rio Tinto over the last 12 months:
| Rio Tinto dividend value | Type | Month payable |
| $5.7704 | Final | April 2022 |
| $0.858 | Special | April 2022 |
| $3.837 | Interim | September 2022 |
Building $800 of monthly passive income from the ASX 200 stock
So, how much would an investor have to fork out to buy 1,000 Rio Tinto shares and take advantage of its current 8.23% trailing dividend yield?
Well, with each share in the ASX 200 stock going for $116.20 at the time of writing, such a parcel would set a buyer back $116,200. If you're anything like me, that figure is far from pocket change.
So, how would I work my way up to holding 1,000 securities? If that were my aim, I would invest a set amount each month and take advantage of Rio Tinto's dividend reinvestment plan (DRP) to compound my holding.
For instance, if I had around $500 per month to invest in Rio Tinto shares, I could buy four each month and still have change (or extra to cover brokerage fees). That's assuming the company's share price stays exactly where it is right now.
If the Rio Tinto dividend yield also stayed put, I could bank 1,000 shares in around 12 years using the power of compounding.
Of course, in the real world, I would work to build a more diverse portfolio to better protect my investments.
Too good to be true?
However, this is where I might disappoint some readers.
As an ASX 200 materials share, Rio Tinto's earnings, and therefore its dividends, are nearly entirely reliant on commodity prices, and that of iron ore in particular.
Unfortunately, some experts are bearish on the future of certain companies involved in the steelmaking ingredient.
Goldman Sachs, for one, is tipping Rio Tinto's earnings to slump in coming years, as my Fool colleague James reports.
The broker expects the company to offer US$4.80 per share in dividends this financial year – $7.16 Australian at the current exchange rate.
That's forecast to fall to $6.24 in financial year 2024 and to $6.18 in financial year 2025.
Still, if the broker's forecasts prove accurate, 1,000 shares in the ASX 200 stock could provide more than $500 per month in passive income in a few years' time.
