2022 ended up being a pretty decent year for ASX share investors seeking passive income. Dividends from shares are a great way to start an alternative income stream.
Dividends are passive income in the truest sense of the word. The cash keeps flowing as long as you own shares, regardless of almost anything else, apart from the size of the dividends paid out, of course.
Last year, ASX investors were blessed with an almost perfect storm when it comes to dividends. After a rough couple of years, the ASX banks all returned to fine dividend form in 2022.
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Big dividends from banks and miners
All four of the bank majors upped their dividends in 2022, with National Australia Bank Ltd (ASX: NAB) the star of the show. In 2022, NAB shares doled out $1.51 per share in fully franked dividends, a good 18.9% above the $1.27 per share investors received in 2021.
The other major dividend payers on the market – ASX resources shares – also had a stellar year. High commodity prices enabled the likes of BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) to keep their dividends at record highs.
And ASX energy shares like Woodside Energy Group Ltd (ASX: WDS) and Whitehaven Coal Ltd (ASX: WHC) really stepped up their dividend game in 2022 as well, as soaring energy prices enabled them to fund record dividends.
So, all in all, it was a very pleasing year for ASX dividend investors last year. As a case in point, the Vanguard Australian Shares Index ETF (ASX: VAS), which is the most popular exchange-traded fund (ETF) on the ASX, paid out a dividend distribution of $6.36 per unit, its highest raw annual payout ever.
Today, that gives this ASX-wide ETF a rather impressive trailing yield of 7.07%.
But 2023 could be an even better year for passive income than 2022. This is for a few reasons.
Why 2023 might be ASX investors' best year yet for passive income
Firstly, the rising interest rates the economy is now experiencing are good news for ASX bank shares. Rising rates enable banks to increase their net interest margins – the difference between what the banks receive for their loans (mortgages and the like) and what they pay out for deposits.
Depending on the health of the overall economy, we could see another bump in the dividends ASX banks will pay out this year.
My Fool colleague James recently discussed ASX broker Goldman Sachs' view on NAB shares. The broker reckons NAB will be able to raise its dividends to $1.66 per share over FY2023 and up again to $1.73 per share over FY2024.
Commodity prices also look strong as we start the new year, with BHP shares recently touching an all-time record share price high after another boost in iron ore. Brokers are also expecting big dividends from BHP in 2023.
So all is looking promising for ASX dividend investors this year.
Don't forget about cash
But there's another new source of passive income available for investors in 2023, which wasn't in 2022: interest. With the Reserve Bank of Australia (RBA) raising the cash rate from 0.1% to the current 3.1% over 2022 (the steepest rise ever), investors can now return to receiving decent passive income just by having cash in the bank.
For years, cash was a non-starter, with interest rates at record lows. But the RBA's new course has changed the game. We can now all receive real income from both our cash and our shares, which hasn't been an option for a very long time.
Thus, 2023 might just be ASX investors' best year yet to get a passive income stream going from our investments. So let's see what happens.
