For $1,000 in monthly passive income, buy 1,770 shares of this ASX 200 stock

This ASX blue chip could unlock enormous passive income for investors.

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Key points

  • Macquarie is expected to pay an annual dividend of $6.78 per share
  • Investors would need 1,770 Macquarie shares to make $12,000 of annual income, or $1,000 a month
  • Profit continues to rise at Macquarie thanks to its commodities exposure

The S&P/ASX 200 Index (ASX: XJO) stock could be a very effective choice for passive income. I'm going to talk about Macquarie Group Ltd (ASX: MQG) shares.

The ASX financial share has done a good job at growing earnings and the dividend since the GFC by diversifying and growing segments of the business that can deliver consistent earnings.

Higher earnings have helped grow the Macquarie share price – over the past five years it's up 85%.

How to make $1,000 of monthly income from Macquarie shares

There are very few ASX stocks that pay monthly. I think it's better to think of a monthly income as an annual amount that can be divided equally into 12.

To make $1,000 a month, we need to generate $12,000 of annual dividend income.

In FY23, according to Commsec, Macquarie is expected to pay an annual dividend per share of $6.78, not including the effect of franking credits. That's a cash dividend yield of 3.6%.

If we owned 1,770 Macquarie shares, then we'd receive $12,000 of annual passive income of dividends in cash. The franking credits would be a bonus on top of that.

The current Commsec forecasts for Macquarie suggest that the dividend could be increased to $6.80 per share in FY24. At the current Macquarie share price, that suggests the ASX 200 stock could pay an FY24 cash dividend yield of 3.6%.

There could be another dividend increase in FY25. Commsec numbers currently predict a dividend per share of $7.20. That's a possible forward cash dividend yield of 3.8%.

If we think about FY25's payout, investors would only need to own 1,667 Macquarie shares to get $12,000 of annual dividends.

How is the ASX 200 stock performing?

The latest update that investors have seen was the quarterly update for the three months to 31 December 2022.

It said that varied conditions for its diverse businesses resulted in a good quarter.

Macquarie said that net profit after tax (NPAT) for the nine months to 31 December 2022 was "slightly up" on the nine months to 31 December 2021.

The cause for the profit increase was that its commodities and global markets (CGM) business profit was "up substantially" in the latest quarter, driven by commodities, including gas and power contributions across all regions.

Macquarie remains well capitalised, with a group surplus of $12.5 billion.

At the current Macquarie share price, the ASX 200 stock is valued at under 15 times FY23's estimated earnings.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Macquarie Group. 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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