When it comes to generating an income from the stock market, Westpac Banking Corp (ASX: WBC) shares are likely to be among the more popular options out there.
Every year, Australia's oldest bank shares a good portion of its huge profits with its shareholders in the form of dividends.
This is expected to be the case again in FY 2023, FY 2024, and FY 2025, with analysts at Goldman Sachs forecasting a growing stream of dividends.
The broker is currently expecting the big four bank to pay fully franked dividends per share of $1.47, $1.56, and then $1.65, respectively, over the three financial years.
Based on the latest Westpac share price of $22.73, this will mean above-average yields of 6.5%, 6.9%, and 7.25%, respectively.
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What would it take to generate $50,000 of retirement income from Westpac shares?
Based on Goldman Sachs' forecasts, to generate $50,000 of income from Westpac shares, you would need to own approximately 34,000 shares.
While this would take a considerable investment of approximately $773,000, investors could recover a significant portion of this back with a few years.
For example, if Goldman is on the money with its forecasts, those 34,000 Westpac shares will then generate $53,000 in FY 2024 and then $56,100 in FY 2025. That's a total return of approximately $159,100 from dividends over the three years.
But wait, there's more! Goldman Sachs currently has a conviction buy rating and $27.74 price target on the bank's shares.
If the Westpac share price rises to this level, you shares will have a market value of just over $943,000. That's $170,000 more than your original investment.
Adding this together with the dividends, this represents a total return of almost $330,000. And that's assuming that Westpac shares don't rise beyond Goldman's 12-month price target over the next three years, which would be unlikely if its earnings and dividends grow in line with the broker's estimates.
And while few people may be in a position to invest the kind of money discussed above, it is worth remembering that the (percentage) returns will be the same (less brokerage) regardless of how much you invest.
All in all, this arguably demonstrates why Westpac shares could be a great option for income investors right now. Particularly those looking for retirement income.
